Satellite Launches in the PRC - Loral

Summary

On February 15, 1996, a Long March 3B rocket carrying the U.S.-built Intelsat 708 satellite crashed just after lift off from the Xichang launch center in the People's Republic of China. This was the third launch failure in 38 months involving the PRC's Long March series of rockets carrying U.S.-built satellite payloads. It also was the first commercial launch using the new Long March 3B. These events attracted intense attention from the international space launch insurance industry, and eventually led to a review of the PRC launch failure investigation by Western aerospace engineers.

The activities of the Western aerospace engineers who participated on the review team - the Independent Review Committee - sparked allegations of violations of U.S. export control regulations. The review team was accused of performing an unlicensed defense service for the PRC that resulted in the improvement of the reliability of the PRC's military rockets and ballistic missiles.

The Intelsat 708 satellite was manufactured by Space Systems/Loral (Loral) under contract to Intelsat, the world's largest commercial satellite communications services provider. Loral is wholly owned by Loral Space & Communications, Ltd.

China Great Wall Industry Corporation, the PRC state-controlled missile, rocket, and launch provider, began an investigation into the launch failure. On February 27, 1996, China Great Wall Industry Corporation reported its determination that the Long March 3B launch failure was caused by a broken wire in the inner frame of the inertial measurement unit within the guidance system of the rocket. In March 1996, representatives of the space launch insurance industry insisted that China Great Wall Industry Corporation arrange for an independent review of the PRC failure investigation.

In early April 1996, China Great Wall Industry Corporation invited Dr. Wah Lim, Loral's Senior Vice President and General Manager of Engineering and Manufacturing, to chair an Independent Review Committee that would review the PRC launch failure investigation. Lim then recruited experts to participate in the Independent Review Committee: four senior engineers from Loral, two from Hughes Space & Communications, one from Daimler-Benz Aerospace, and retired experts from Intelsat, British Aerospace, and General Dynamics.

The Independent Review Committee members and staff met with PRC engineers during meetings in Palo Alto, California, and in Beijing. During these meetings the PRC presented design details of the Long March 3B inertial measurement unit, and the committee reviewed the failure analysis performed by the PRC.

The Independent Review Committee took issue with the conclusions of the PRC investigation because the PRC failed to sufficiently explain the telemetry data obtained from the failed launch.

The Independent Review Committee members proceeded to generate a Preliminary Report, which was transmitted to China Great Wall Industry Corporation in May 1996 without prior review by any U.S. Government authority. Before the Independent Review Committee's involvement, the PRC team had concluded that the most probable cause of the failure was the inner frame of the inertial measurement unit. The Independent Review Committee's draft report that was sent to the PRC pointed out that the failure could also be in two other places: the inertial measurement unit follow-up frame, or an open loop in the feedback path. The Independent Review Committee recommended that the PRC perform tests to prove or disprove all three scenarios.

After receiving the Independent Review Committee's report, the PRC engineers tested these scenarios and, as a result, ruled out its original failure scenario. Instead, the PRC identified the follow-up frame as the source of the failure. The PRC final report identified the power amplifier in the follow-up frame to be the root cause of the failure.

According to the Department of Defense, the timeline and evidence suggests that the Independent Review Committee very likely led the PRC to discover the true failure of the Long March 3B guidance platform.

At the insistence of the State Department, both Loral and Hughes submitted "voluntary" disclosures documenting their involvement in the Independent Review Committee. In its disclosure, Loral stated that "Space Systems/Loral personnel were acting in good faith and that harm to U.S. interests appears to have been minimal." Hughes' disclosure concluded that there was no unauthorized export as a result of the participation of Hughes employees in the Independent Review Committee.

The materials submitted by both Loral and Hughes in their disclosures to the State Department were reviewed by several U.S. government offices, including the State Department, the Defense Technology Security Administration, the Defense Intelligence Agency, and other Defense Department agencies.

The Defense Department assessment concluded that "Loral and Hughes committed a serious export control violation by virtue of having performed a defense service without a license . . . "

The State Department referred the matter to the Department of Justice for possible criminal prosecution.

The most recent review of the Independent Review Committee matter was performed by an interagency review team in 1998 to reconcile differences in the assessments of the other agencies. That interagency team concluded:

* The actual cause of the Long March 3B failure may have been discovered more quickly by the PRC as a result of the Independent Review Committee report * Advice given to the PRC by the Independent Review Committee could reinforce or add vigor to the PRC's design and test practices * The Independent Review Committee's advice could improve the reliability of the PRC's rockets * The technical issue of greatest concern was the exposure of the PRC to Western diagnostic processes, which could lead to improvements in reliability for all PRC missile and rocket programs

Intelsat 708 Launch Failure Loral Investigation Provides PRC With Sensitive Information

Overview of Events

On February 15, 1996, the Intelsat 708 satellite was launched on a Long March 3B rocket from the Xichang Satellite Launch Center in the PRC.1 Even before clearing the launch tower, the rocket tipped over and continued on a flight trajectory roughly parallel to the ground.2 After only 22 seconds of flight, the rocket crashed into a nearby hillside, destroying the rocket and the Intelsat satellite it carried.

The crash created an explosion that was roughly equivalent to 20 to 55 tons of TNT. It destroyed a nearby village. According to official PRC reports, six people died in the explosion,3 but other accounts estimate that 100 people died as a result of the crash.4

The Intelsat 708 satellite was manufactured by a U.S. company, Space Systems/Loral (Loral), under contract to Intelsat, the world's largest commercial satellite communications services provider.5 In October 1988, Intelsat had awarded a contract to Loral to manufacture several satellites in a program known as Intelsat VII. That contract had a total value of nearly $1 billion.

Intelsat subsequently exercised an option under that contract for Loral to supply four satellites - known as the Intelsat VIIA series - including the Intelsat 708 satellite.6

In April 1992, Intelsat contracted with China Great Wall Industry Corporation for the PRC state-owned company to launch the Intelsat VIIA series of satellites into the proper orbit using PRC Long March rockets.7 Low price and "politics" were important factors in selecting the PRC launch services.8

In March 1996, following the Intelsat 708 launch failure, Intelsat terminated its agreement with China Great Wall Industry Corporation for additional launch services.9

The PRC's Launch Failure Investigation

China Great Wall Industry Corporation created two groups of PRC nationals to investigate the launch failure. These were the Failure Analysis Team and the Failure Investigative Committee. These two committees reported to an Oversight Committee.

On February 27, 1996, China Great Wall Industry Corporation reported its determination that the Long March 3B launch failure was caused by a failure in the inertial measurement unit within the control system of the rocket.10 The inertial measurement unit is a component that provides an attitude reference for the rocket, basically telling it which way is up.11

The Asia Pacific Telecommunications Insurance Meeting

On March 14, 1996, a group of space launch insurance representatives met in Beijing with representatives of Hughes, the PRC-controlled Asia Pacific Telecommunications Satellite Co., Ltd., and China Great Wall Industry Corporation. The purpose of the meeting was to examine the risks associated with the upcoming launch of the Apstar 1A satellite that was scheduled for July 3, 1996 on a Long March 3 rocket, in the wake of the February 15 Long March 3B crash.12

The PRC assured those at the meeting that the launch was not at risk because the Long March 3 rocket uses a different kind of inertial measurement unit than the one that failed on the Long March 3B.13

At that meeting, Paul O'Connor, from the J & H Marsh & McLennan insurance brokerage firm, reportedly insisted that the PRC do two things before the space insurance industry would insure future launches from the PRC: first, produce a final report on the cause of the Long March 3B launch failure; and second, arrange for an independent review of the PRC failure investigation.14

The PRC's Creation of an 'Independent Review Committee'

In early April 1996, China Great Wall Industry Corporation invited both Loral and Hughes Space & Communications (Hughes) to participate in an Independent Review Committee that would review the PRC launch failure investigation.15 The PRC then invited Dr. Wah Lim, Loral's Senior Vice President and General Manager of Engineering and Manufacturing, to chair the committee.16

Lim impaneled the Independent Review Committee with experts from Loral, Hughes, and Daimler-Benz Aerospace, and retired experts from General Dynamics, Intelsat, and British Aerospace.17

The Independent Review Committee's Meetings

The Independent Review Committee held two sets of official meetings.18 The first set of meetings was from April 22 to 24, 1996, at Loral's offices in Palo Alto, California.19 The second set of meetings was from April 30 to May 1, 1996, in Beijing.20

At these meetings, the Independent Review Committee members reviewed the extensive reports furnished by China Great Wall Industry Corporation documenting the PRC launch failure investigation, and provided the PRC with numerous technical questions regarding the material.21 The committee's activities also included tours of PRC assembly and test facilities for guidance and control equipment. The Independent Review Committee members caucused at their hotel in Beijing on April 30 to discuss and assess the PRC investigation privately.22

An aborted third round of Independent Review Committee meetings was scheduled for June 1996. However, the U.S. Government issued a cease and desist letter to both Loral and Hughes, ordering the companies to stop all activity in connection with the failure review. The letter also requested each company to disclose the facts related to, and circumstances surrounding, the Independent Review Committee.23

The Independent Review Committee activity was not authorized by any U.S. Government export license or Technical Assistance Agreement.24 Loral had obtained two export licenses (No. 533593 and No. 544724) from the State Department in 1992 and 1993 to allow the launch of the Intelsat 708 satellite in the PRC. Neither of those licenses authorized any launch failure investigative activity.25

Loral was aware from the start of the Independent Review Committee's meetings that it did not have a license for the Independent Review Committee activity.26

The Independent Review Committee meetings were not attended by any U.S. Government monitors, as almost certainly would have been required had there been an export control license.

The Independent Review Committee's Report

Lim had promised the PRC that the Independent Review Committee would report its preliminary findings by May 10, 1996.27 This deadline was driven by Loral's need to determine, by that date, whether its Mabuhay satellite would be launched on a PRC rocket as planned.

Following the meeting of the Independent Review Committee in Beijing, the committee members collaborated by facsimile and e-mail to generate a report of their findings. Loral engineer Nick Yen, who was the Secretary for the Independent Review Committee, collected input from the committee members and compiled the report. British committee member John Holt drafted the technical section of the report, with inputs from the other committee members.28

A draft of the Independent Review Committee Preliminary Report was completed by May 7, 1996; the Preliminary Report was completed on May 9, 1996.

Substance of the Preliminary Report

The Independent Review Committee's Preliminary Report was approximately 200 pages in length. It comprised:

* Meeting minutes * Independent Review Committee questions and China Great Wall Industry Corporation answers * Findings * Short-term and long-term recommendations * The Independent Review Committee charter and schedule * The Independent Review Committee membership roster * Appendices29

The thrust of the recommendations presented in the report was:

Short-Term Recommendations30

1) An explanation of the total flight behavior is essential to fully confirm the failure mode. A mathematical numerical solution is recommended immediately, to be followed by a hardware in-the-loop simulation test when possible.

2) The detailed design of the motor and its wiring should be studied to either: a) preclude harness motion during gimbal motion or b) alleviate the impact of unavoidable deflection on solder joint integrity.

3) Higher quality control and quality standards in the manufacturing process need to be implemented and adhered to.

4) The China Academy of Launch Technology should re-examine the environmental test plan for all avionics equipment. It is the Independent Review Committee's opinion that the environmental tests performed by the China Academy of Launch Technology might not be adequate for meeting the requirements of the expected maximum flight loads, including acoustic noises, or detecting the defects in the flight hardware.

5) The Independent Review Committee is very concerned over the range safety issues in the areas of operation safety, launch safety and personal safety in general. Due to the difference in operations and requirements by various customers/satellite contractors of China Great Wall Industry Corporation, it is not suitable for the Independent Review Committee to make generic recommendations for overall implementation requirements. However, China Aerospace Corporation and China Great Wall Industry Corporation should carefully review the Action Items, #19, #20, and #21, of the first committee meeting and propose a well thought implementation plan to be reviewed, agreed, and accepted by China Great Wall Industry Corporation's individual customer/prime satellite contractor.

Long-Term Recommendations31

1) Quality control philosophy and practice of the fabrication, assembly and test of the inertial measurement unit should be strengthened. Personnel should be trained periodically in careful handling and cleanliness concerns. Cleanliness and careful test handling should be emphasized and maintained at all times.

2) Good design and good quality control can achieve the desired reliability of hardware. However, a design with adequate redundancy can also achieve the same desired reliability. Therefore, it should be strongly considered in avoiding critical single point (or path) failure.

The Report Goes to the PRC

On May 7, 1996, Loral's Nick Yen, the Secretary of the Independent Review Committee, faxed the draft Preliminary Report to the committee members, and to China Great Wall Industry Corporation.

On May 10, 1996, the final Independent Review Committee Preliminary Report, less attachments, was faxed by Yen to China Great Wall Industry Corporation.32 The same day, the complete Preliminary Report was express-mailed by Yen to the Independent Review Committee members.33

On May 13, Yen also faxed the Preliminary Report to a hotel in Beijing for Paul O'Connor of J & H Marsh & McLennan, who was a guest there.34

None of these transmitted documents was submitted to the U.S. Government for review prior to its transmission to the PRC.35

Defense Department Analyst Discovers the Activities of the Independent Review Committee

The May 13-19, 1996, issue of Space News, a widely-read industry publication, contained an article stating that Wah Lim, as Chairman of the Independent Review Committee, had faxed the committee's report of the failure review to the PRC.36

On or about May 14, 1996, Robert Kovac, an Export Analyst in the Defense Department's Defense Technology Security Administration (DTSA), read the Space News article and became concerned that the Independent Review Committee's activities were not conducted under a license. Kovac was particularly alarmed that, according to the article, a failure review report had been distributed to the PRC.

Kovac immediately acted on his concern. He called Loral's Washington representative and asked whether the Independent Review Committee's activities had been conducted under a license. Loral's response was to propose a meeting with Kovac and others for the following day.

On May 15, 1996, Loral's Export Control Officer met with licensing personnel at the State Department and the Defense Department to report on the Independent Review Committee's activities.

The Defense Department advised the Loral officials to halt all Independent Review Committee activity and consider submitting a "voluntary" disclosure to the State Department.

The State Department made similar recommendations, and sent letters to both Loral and Hughes soon afterward that reported that the State Department had reason to believe that the companies may have participated in serious violations of the International Traffic in Arms Regulations.

The State Department also requested that the companies immediately cease all related activity that might require approval, provide a full disclosure, and enumerate all releases of information that should have been controlled under the International Traffic in Arms Regulations.

Loral and Hughes Investigate the Matter

On May 23, 1996, Loral engaged the law firm of Feith & Zell of Washington, D.C., to conduct a limited investigation, as counsel for Loral, of the events related to the Independent Review Committee. That investigation included document collection and review, and interviews of Loral employees. On June 17, 1996, a "voluntary" disclosure was submitted to the State Department by Feith & Zell on behalf of Loral.37

In that disclosure, Loral stated that its procedures for implementing export control laws and regulations were deficient, but that Loral was implementing corrective measures. Also, Loral's disclosure concluded that "Loral personnel were acting in good faith and that harm to U.S. interests appears to have been minimal." 38

Hughes' General Counsel's office began an investigation into the Independent Review Committee matter in early June 1996, after receiving the State Department letter advising that Hughes may have been a party to serious violations of the International Traffic in Arms Regulations. Hughes' investigation report was submitted to the State Department on June 27, 1996. The Hughes report concluded that there was no unauthorized export as a result of the participation of Hughes employees in the Independent Review Committee.

The Hughes employees reportedly advised Loral employees to obtain the appropriate State Department approvals prior to furnishing the documents to the PRC.39

The Aftermath: China Great Wall Industry Corporation Revises Its Findings on the Cause of the Accident

In September 1996, China Great Wall Industry Corporation discarded its original analysis, and in October 1996 made its final launch failure presentation to officials at Loral.

China Great Wall Industry Corporation determined that the root cause of the failure was a deterioration in the gold-aluminum wiring connections within a power amplifier for the follow-up frame torque motor in the inertial measurement unit. This was the very problem the Independent Review Committee had identified in their meetings with PRC officials and in the Preliminary Report.

U.S. Government Assessments of the Independent Review Committee's Report, and Referral to the Department of Justice

The materials submitted by both Loral and Hughes in their 1996 disclosures to the State Department were reviewed by several U.S. Government offices, including the State Department, the Defense Department, the Central Intelligence Agency, and an interagency review team.

The 1997 Defense Department assessment concluded that "Loral and Hughes committed a serious export control violation by virtue of having performed a defense service without a license . . . ."

Based on this assessment, the Defense Department recommended referral of the matter to the Department of Justice for possible criminal prosecution.

In July 1998, a U.S. Government interagency team conducted a review of the Independent Review Committee's activities and reported the following:

* The actual cause of the Long March 3B failure may have been discovered more quickly by the PRC as a result of the Independent Review Committee's report * Advice given to the PRC by the Independent Review Committee could reinforce or add vigor to the PRC's design and test practices * The Independent Review Committee's advice could improve PRC rocket and missile reliability * The technical issue of greatest concern was the exposure of the PRC to a Western diagnostic process40

The interagency review also noted that the Long March 3B guidance system on which Loral and Hughes provided advice is not a likely candidate for use in future PRC intercontinental ballistic missiles. The Long March 3B guidance system is well suited for use on a rocket.

Details of the Failed Long March 3B-Intelsat 708 Launch and Independent Review Committee Activities

The specific details of the events surrounding the Long March 3B-Intelsat 708 launch failure and the Independent Review Committee are described in the remainder of this Chapter.

Background on Intelsat and Loral

Intelsat

The International Telecommunications Satellite Organization (Intelsat), headquartered in Washington, D.C., is an international not-for-profit cooperative of 143 member nations and signatories that was founded in 1964. Intelsat is the world's largest commercial satellite communications services provider. Its global satellite systems bring video, Internet, and voice/data services to users in more than 200 nations and on every continent.41

The member nations contribute capital in proportion to their relative use of the Intelsat system, and receive a return on their investment. Users pay a charge for all Intelsat services, depending on the type, amount, and duration of the service. Any nation may use the Intelsat system, whether or not it is a member. Intelsat operates as a wholesaler, providing services to end-users through the Intelsat member in each country. Some member nations have chosen to authorize several organizations to provide Intelsat services within their countries. Currently, Intelsat has more than 300 authorized customers.42

Intelsat includes two members from the PRC: China Telecom is a signatory, and Hong Kong Telecom is an investing entity. Their investment shares are 1.798 percent and 1.269 percent, respectively, giving the PRC a country total of 3.067 percent, which makes it the eighth largest ranking member nation.43

On January 2, 1999, Intelsat had a fleet of 19 high-powered satellites in geostationary orbit. These satellites include the Intelsat 5 and 5A, Intelsat 6, Intelsat 7 and 7A, and the Intelsat 8 and 8A families of satellites. The newest generation of Intelsat satellites, the Intelsat 9 series, is in production.44

Nine satellites were manufactured in the Intelsat VII and VIIA series. Loral manufactured this series of satellites, and they were launched during the period from 1993 to 1996.45

Intelsat VII and VIIA Series Satellites46

Satellite Rocket Launch Date Launch Results

701 Ariane 44 (France) 22 October 1993 Success

702 Ariane 44 LP(France) 17 June 1994 Success

703 Atlas II AS (US) 6 October 1994 Success

704 Atlas II AS (US) 10 January 1995 Success

705 Atlas II AS (US) 22 March 1995 Success

706 Ariane 44 LP(France) 17 May 1995 Success

707 Ariane 44 P (France) 14 March 1996 Success

708 Long March 3B (PRC) 15 February 1996 Failure

709 Ariane 44 LP (France) 15 June 1996 Success

Loral Space and Communications

Loral Space and Communications, Ltd., is one of the world's leading satellite communications companies and has substantial interests in the manufacture and operation of geosynchronous and low-earth-orbit satellite systems. The company is headquartered in New York City and is listed on the New York Stock Exchange. Bernard Schwartz is its Chairman. The company employs approximately 4,000 people.47

Loral Space and Communications, Ltd., owns Space Systems/Loral, one of the world's leading manufacturers of space systems. It also leads an international joint venture for the Globalstar system of satellites that is expected to be placed in service in 1999. Globalstar will support digital telephone service to handheld and fixed terminals worldwide. Loral Space and Communications, Ltd., together with its partners, will act as the Globalstar service provider in Canada, Brazil, and Mexico. Together with Qualcomm, it holds the exclusive rights to provide in-flight phone service using Globalstar in the United States. Loral Skynet, acquired from AT&T in March 1997, is a leading domestic satellite service provider.48

Space Systems/Loral

Space Systems/Loral (Loral) designs, builds, and tests satellites, subsystems, and payloads; provides orbital testing, launch services, and insurance procurement; and manages mission operations from its Mission Control Center in Palo Alto, California. Loral was formerly the Ford Aerospace and Communications Corporation. In 1990, Ford Aerospace was acquired by a group including Loral Space and Communications, Ltd., and re-named Space Systems/Loral. Loral is located in Palo Alto, California, and Robert Berry is its President.49

At the time of the Intelsat 708 failure, Loral was 51 percent owned by Loral Space and Communications, Ltd. The remainder was owned equally by four European aerospace and telecommunications companies: Aerospatiale, Alcatel Espace, Alenia Spazio S.p.A., and Daimler-Benz Aerospace AG. In 1997, Loral Space and Communications, Ltd. acquired the foreign partners' respective ownership interests in Loral.50

Loral is the leading supplier of satellites to Intelsat. Loral's other significant customers include the PRC-controlled Asia Pacific Telecommunications Satellite Co., Ltd., CD Radio, China Telecommunications Broadcast Satellite Corporation, Globalstar, Japan's Ministry of Transport, Mabuhay Philippines Satellite Corporation, MCI/News Corp., the National Aeronautics and Space Administration (NASA), the National Oceanic and Atmospheric Administration, PanAmSat, Skynet, and TCI. Loral employs approximately 3,100 people, has annual sales of approximately $1.4 billion, and has a backlog of orders for approximately 80 satellites.51

Intelsat 708 Launch Program

On April 24, 1992, Intelsat awarded a contract to China Great Wall Industry Corporation for the launch of Intelsat VIIA satellites into geosynchronous transfer orbit.52

On or about September 18, 1992, the State Department issued a license to Loral for the export to the PRC of technical data in support of technical discussions for the launch of an Intelsat VIIA satellite.53 On or about July 14, 1993, the State Department issued an export license to Loral for the export of the Intelsat VIIA (708) satellite and associated equipment necessary for the launch.54

Sometime in 1994, representatives from Intelsat and Loral performed a site survey at the Xichang launch facility in the PRC. One of the Intelsat representatives who was involved in the launch described the facility as "primitive but workable."

On or about January 11, 1996, the Intelsat 708 satellite was shipped to Xichang.

The Intelsat 708 Launch Failure

On February 15, 1996, at approximately 3:00 a.m. local time, a PRC-manufactured Long March 3B rocket carrying the Intelsat 708 satellite crashed into a mountain side approximately 22 seconds after liftoff from the Xichang launch site. 55 Employees and family members of Loral witnessed the launch failure from Palo Alto through a video feed from the launch site.56

Members of the Intelsat and Loral team in the PRC were not allowed by PRC officials to visit the rocket debris field until late in the afternoon of that same day.

At least three different explanations have been offered as to why the Loral and Intelsat employees were not allowed onto the debris field for approximately 12 hours:

* The first explanation was that Loral and Intelsat employees were kept away from the debris field until safety hazards from the crash site could be neutralized * The second, as reported in the news media, was that the delay had been imposed to give PRC officials time to seek out satellite encryption devices intended to protect the satellite command processor from unauthorized messages once the satellite was in orbit57 * The third explanation, offered by at least one Loral employee, was that the time delay gave the PRC an opportunity to clean up the probable human carnage that resulted from the crash

Once they were allowed to go to the site, members of the Loral team began collecting and separating satellite debris from the rocket debris. A rough inventory was done, and the satellite debris subsequently was crated and shipped back to Loral in Palo Alto for analysis.58

Upon examination by Loral engineers in Palo Alto, it was determined that the satellite's encryption devices had not, in fact, been recovered from the crash site.

Events Leading Up to the Creation of the Independent Review Committee

On or about February 27, 1996, two weeks after the failure, PRC engineers announced that they believed that the cause of the Intelsat 708 launch failure was the inertial platform of the control system.59 This information was made public in an attempt to demonstrate that the PRC had identified the cause of the launch failure.

The interested parties included the aerospace industry in general, but particularly Loral, Hughes Space and Communications Corporation (Hughes), and the space launch insurance industry.

Hughes was scheduled to launch its Apstar 1A satellite on a Long March 3 rocket on or about April 1, 1996, less than two months after the Intelsat 708 crash. Even though the Apstar 1A satellite was scheduled for a different rocket, concern was still high in the insurance community.

On March 14, 1996, a meeting was held in Beijing involving Hughes; the PRC-controlled Asia Pacific Telecommunications Satellite Co., Ltd., owner of the Hughes-manufactured Apstar 1A; and the insurance underwriters for the Apstar 1A.60

The main information the PRC authorities, including the Asia Pacific Telecommunications representatives, sought to convey to the insurance underwriters was that their failure investigation relating to the Intelsat 708 launch had shown the cause to be a failure of the inertial measurement unit.61 This is the rocket subsystem that provides attitude, velocity, and position measurements for guidance and control of the rocket.62

The PRC representatives stated that the inertial measurement unit used on the Long March 3B that failed was different from the unit used on the Long March 3, which was the rocket that would be used to launch the Apstar 1A. They concluded, therefore, that there should be no cause for concern regarding the Apstar 1A launch.63

Nonetheless, representatives of the insurance underwriters stated that insurance on the Apstar 1A launch would be conditioned on delivery of a final report on the root causes of the Long March 3B failure and a review of that report by an independent oversight team.64

Paul O'Connor, Vice President of J & H Marsh & McLennan space insurance brokerage firm, later reported to Feith & Zell, a law firm representing Loral on possible export violations, that insurers had paid out almost $500 million in claims involving prior PRC launch failures, and wanted the PRC to provide full disclosure about the cause of the Intelsat 708 failure.65

From April 10 through 12, 1996, China Great Wall Industry Corporation held a meeting in Beijing concerning the Long March 3B failure investigation.66 Loral sent three engineers to the meeting: Dr. Wah Lim, Vice President and General Manager of Manufacturing; Nick Yen, Integration Manager, Intelsat 708 Program; and Nabeeh Totah, Manager of Structural Systems.67 Intelsat sent as its representative, Terry Edwards, Manager of Intelsat's Launch Vehicle Program Office. China Great Wall Industry Corporation provided Intelsat and Loral with three volumes of data and eight detailed reports on the current status of the failure investigation. The PRC's Long March 3B Failure Analysis Team presented the failure investigation progress, and the preliminary results up to that date, to Intelsat and Loral.68

On or about April 10, 1996, Bansang Lee, Loral's representative in the PRC, on behalf of China Great Wall Industry Corporation, asked Lim to be the Chairman of an independent oversight committee.

On or about April 10, 1996, Lim telephoned Robert Berry, Loral's President, from the PRC. Lim reportedly told Berry that representatives of China Great Wall Industry Corporation had asked him to chair an independent oversight committee reviewing the PRC analysis of the Intelsat 708 launch failure.69

Berry says he gave permission for Lim to act as the chairman of the independent oversight committee because of serious safety issues associated with the PRC launch site that had been brought to his attention after the Intelsat 708 failure.70

Before leaving Beijing, Lim created a charter for the committee, and he changed its name to the "Independent Review Committee." 71 Eventually, the Independent Review Committee was constituted with the following members and staff:

Membership of the Independent Review Committee72

Name Employer Position on IRC

Wah Lim Senior VP & GM of Chairman Engineering & Manufacturing, Loral

John A. Holt Retired Managing Member Director, Space Systems Group, British Aerospace

Karl Kachigan Retired, Chief Member Engineer & Director of ATLAS Launch Vehicle, General Dynamics

Frederick Ormsby Retired Department Member Manager, Spacecraft Engineering & Launch Vehicle Program Office, Intelsat

John Smay Chief Technologist, Technical Staff Hughes

Robert Steinhauer Chief Scientist, Member Hughes

Reinhard Hildebrandt Team Leader, Flight Member Operations & Post Flight Evaluation, DASA Daimler-Benz Aerospace

Nick Yen Department Manager, Secretary Launch Vehicle & Launch Operations, Loral

Nabeeh Totah Director, Spacecraft Technical Staff Engineering Laboratory, Loral

Jack Rodden Principal Engineer, Technical Staff Loral

Fred Chan Director, Controls Technical Staff Engineering, Loral

The Government Security Committee Meeting at Loral

On April 11, 1996, a quarterly Government Security Committee meeting was held at Loral.73

The Government Security Committee was established by Loral in cooperation with the Department of Defense in 1991, when 49% of Loral's stock was owned by foreign investors.74 The express purpose of the Government Security Committee was to monitor Loral's practices and procedures for protecting classified information and technology controlled under the International Traffic in Arms Regulations.75

The meeting attendees recounted to the Select Committee that Loral President Berry arrived at the April 11 Government Security Committee meeting after most of the others had gathered for it.76 Berry announced at that time that he had just finished with a telephone call from Lim (in the PRC) and had given Lim the authority to chair the Independent Review Committee.77

According to Berry, he told the meeting that Lim had advised him that the PRC was interested in Lim chairing the Independent Review Committee. Berry testified that he approved Lim's request to participate during that telephone conversation. Berry testified that he was aware that a report would be prepared and distributed to the PRC and insurance companies. However, he had an understanding with Lim that the report would not contain any technical data or technical assistance.78 A discussion among the meeting attendees ensued.

The minutes reflect that Dr. Stephen Bryen, an outside member of the Government Security Committee, recommended that "any report prepared as a result of [Loral's] participation in the failure review be submitted to the State Department prior to dissemination to the Chinese." 79

Bryen testified that he was disturbed by the idea of a failure investigation involving the PRC, and that this would involve technology transfer which required State Department approval. Bryen testified that there was a lot of discussion on the matter, but all agreed that nothing would happen without State Department approval.80

Duncan Reynard, Loral's Export Control Manager, recalls that Bryen said:

You know, if there's anything written generated by this group of people, you should run it by ODTC [Office of Defense Trade Controls, Department of State] before you release it.81

Reynard says Loral Technology Transfer Control Manager William Schweickert, Loral General Counsel and Vice President Julie Bannerman, and he attended the Government Security Committee meeting. All three agreed with Bryen's statement. Reynard says that he felt some responsibility in connection with Bryen's comment; however, there was no indication from anyone that a report was going to be prepared. Reynard says that if he had known that a report was going to be prepared, with the intention of disseminating it to foreigners, Loral would have sought the appropriate U.S. Government approval.82

Reynard says that neither he, as Export Control Manager, nor Bannerman, the General Counsel, nor Schweickert, the Technology Control Manager, took any proactive measures to follow up on this matter.

Reynard says that "we didn't know what was happening - we didn't - we were waiting for somebody to tell us." 83 According to interview notes of Reynard prepared by an attorney from Loral's outside counsel, Feith & Zell, Reynard said that no one asked him to look into the matter raised by Dr. Bryen.84

Loral's General Counsel, Julie Bannerman, testified that no one conducted any research to determine whether the intended activities of the Independent Review Committee were legal, or within Loral's company policy. Bannerman also testified that the primary responsibility for matters relating to Bryen's statements would have rested with Loral's export control office, namely Reynard and Schweickert.85

Even though there was a formal mechanism for assigning action items in Government Security Committee meetings, no action item was generated at the April 11 meeting in connection with the Independent Review Committee. No one was assigned to inform Lim of the Government Security Committee's decision that Loral's participation in the Independent Review Committee needed to be approved by the Department of State.86

One of the participants at the Government Security Committee meeting was Steve Zurian of Trident Data Systems. Zurian says that Trident has been a security advisor to Loral for nine years and provides export consulting to the company. Trident's responsibilities include attending the Government Security Committee meetings, taking notes, and drafting the minutes. Zurian says that he and Caroline Rodine, another Trident employee, attended the April 11, 1996, and the July 11, 1996, Government Security Committee meetings.

Zurian says that it was the consensus of the attendees at the April 11, 1996, Government Security Committee meeting that Loral should seek and obtain approval from the Department of State before participating in the Independent Review Committee, and that Loral President Berry agreed with the decision.

Zurian says that at the July 11, 1996, Government Security Committee meeting, Berry said that Loral had followed up on Bryen's recommendation to obtain State Department approval to participate in the Independent Review Committee. (As Loral admitted in its June 27, 1996 disclosure to the Department of State, however, this was not the case.)87

Zurian's draft of the July 11, 1996, meeting minutes reflects Berry's remarks about obtaining State Department approval. Zurian says that he and Rodine reviewed their notes of the meeting, specifically regarding Berry's remarks, and both agree that the draft minutes are accurate.

Zurian says that it is possible that Loral's management failed to tell Berry that they had not obtained the appropriate State Department approval. He attributes Berry's erroneous understanding to his staff's failure to advise him of the facts.

But numerous Loral personnel, including Berry, Bannerman, and Reynard, were aware of Loral's deliberations with the Department of State regarding the limits on Loral's participation in PRC failure analyses.88

On April 3, 1996, for example, Loral proposed to the State Department certain language that restricted Loral's participation in possible failure analyses in connection with two upcoming Long March launches from the PRC, for the Mabuhay and Apstar satellites. Loral's proposal was that it would not comment or ask questions in the course of those failure analyses.89

It also should be noted that on or about January 24, 1996, a few weeks prior to the Intelsat 708 failure, Loral received and reviewed the Apstar technical data export license, which stated:

Delete any discussion or release under this license of any technical data concerning launch vehicle [rocket] failure analysis or investigation.90

On or about February 22, 1996, a week after the Intelsat 708 failure, Loral received and reviewed the Mabuhay technical data export license that also stated:

Delete any discussion or release under this license of any technical data concerning launch vehicle [rocket] failure analysis or investigation.91

The Apstar 1A Insurance Meeting

On April 15 and 16, 1996, a meeting of representatives of companies providing reinsurance for the upcoming Apstar 1A satellite launch took place in Beijing. The Apstar 1A launch, and the issues arising from the Long March 3B rocket failure, were discussed. The launch failure presentations by PRC representatives made substantially the same points as had been made at the March 14, 1996, meeting: that the Long March 3B failure was due to the inertial measurement unit, and that this was not a concern for the Apstar 1A launch because it would be launched by a Long March 3 rocket utilizing a different inertial measurement unit with a previous record of successful launches.92

At the same meeting, in response to the requirement that had been stated by the insurance underwriters at the March 14 Beijing meeting, the PRC representatives announced the creation of an independent oversight committee (shortly thereafter named the Independent Review Committee) to review the findings and recommendations of the PRC's failure investigation.93

Wah Lim and Nick Yen of Loral, the designated Chairman and Secretary of the Independent Review Committee, were present at the meeting and discussed the role of the committee and its members. The two prospective members from Hughes - John Smay, the company's Chief Technologist, and Robert Steinhauer, its Chief Scientist - were also present, as was Nabeeh Totah of Loral, who would serve as one of four Loral technical staff members to the Independent Review Committee.94

During the April 15 and 16 insurers' meeting, the participants were taken on a tour of the Long March rocket assembly area. They were also shown, in a partially opened state, units described by the PRC as the older Long March 3 inertial measurement unit and the newer Long March 3B inertial measurement unit. Thus, almost half of the Independent Review Committee participants had exposure at this time to the findings and views of the PRC derived from their failure investigation, prior to the first official Independent Review Committee meeting.95

On April 17, 1996, Wah Lim sent a letter to all Independent Review Committee members and to China Great Wall Industry Corporation, confirming that the first meeting of the committee would be in Palo Alto, California from April 22 to 24, 1996.

The April 1996 Independent Review Committee Meetings in Palo Alto Meeting on April 22, 1996

On April 22, 1996, the first Independent Review Committee meeting convened at Loral in Palo Alto. The foreign committee members, John Holt and Reinhard Hildebrandt, were not present. No PRC officials were present, due to a delay caused by visa problems.

Wah Lim called the meeting to order, and the meeting began without a technology transfer briefing.

The matter of a technology transfer briefing was subsequently raised, which prompted Lim to leave the meeting. Approximately ten minutes later, William Schweickert, Loral's Technology Control Manager, arrived and provided a technology export briefing to the Independent Review Committee members who were present. According to one of the participants, it appeared that Schweickert gave a presentation concerning the rules that should be followed at a PRC launch site, rather than a briefing covering technical data exchanges.

Schweickert provided the Independent Review Committee members with a three-page technology export briefing.96 Schweickert says that he had never prepared a briefing for a failure review before. Thus, he says he used the export licenses for the launch of the Intelsat 708 as a basis for the briefing. (Schweickert says that he learned about the imminent arrival of the PRC visitors only a few days earlier.) However, according to notes of an interview of Schweickert prepared by an attorney from Feith & Zell, Loral's outside attorneys, Schweickert looked at the licenses relating to the Mabuhay and Apstar IIR satellite programs for assistance in preparing the Independent Review Committee briefing. Those licenses were more current than the Intelsat 708 license issued in 1992.

Schweickert stated that these two licenses required the presence of Defense Department monitors during any discussions with the PRC. He said he knew Defense Department monitors would not be present at the Independent Review Committee meeting. As a result, he said, he would have to be "careful" in preparing his export briefing. Schweickert also said that there was not enough time to get a license.

Schweickert told the Independent Review Committee members that Loral did not have a license for the meeting. According to Schweickert, he discussed what he thought the Independent Review Committee could do without a license - such as receive technical information from China Great Wall Industry Corporation, request clarification of certain items, ask questions, and indicate acceptance or rejection of the PRC's conclusions.

Schweickert did not attend any of the Independent Review Committee meetings, other than to give the briefing on the first day.

Duncan Reynard, Loral's Export Control Manager, did not learn of the Independent Review Committee meeting on April 22, 1996 until Schweickert told him that same day. Reynard says that Schweickert told him he had prepared a briefing for the meeting, and he asked Reynard to review it. According to interview notes of Reynard prepared by an attorney from Feith & Zell, Reynard did not see Schweickert's briefing until late in the day on April 22, 1996.97 Reynard says he reviewed Schweickert's briefing and said it was "okay." 98

Reynard says he was not surprised to find out that PRC representatives would be visiting Loral. Reynard says he "assumed the briefing and the people that would normally attend something like that were knowledgeable enough to know how to handle that kind of a meeting." 99

Reynard also says that his understanding of the meeting was that the PRC representatives were going to make a presentation concerning their failure investigation of the Intelsat 708 satellite.100

It should be noted that, during this first Independent Review Committee meeting at Loral's offices, Loral's President, Executive Vice President, and Export Control Manager were all absent. They had traveled to Europe in connection with an unrelated business trip, and for vacation.101

The Independent Review Committee members who were present spent the first day at Palo Alto reviewing the PRC failure analysis. The documents consisted of approximately 14 reports dealing with technical material, analysis, and failure modes.102

Meeting on April 23, 1996

On April 23, 1996, the two foreign members of the Independent Review Committee and the PRC engineers arrived at Loral. The PRC representatives included:

o Huang Zouyi, China Great Wall Industry Corporation o Professor Chang Yang, Beijing Control Device Institute o Li Dong, China Academy of Launch Vehicle Technology o Shao Chunwu, China Academy of Launch Vehicle Technology103

The majority of this second day was spent trying to understand the PRC failure investigation. Many Independent Review Committee members say there was difficulty in understanding the PRC representatives' presentation because of language problems. As a result, many clarifying questions were asked of the PRC representatives. However, Feith & Zell interview notes of one Independent Review Committee member specifically stated that a "good translator" was present at that meeting.

The PRC officials stated that they believed the failure mode was located in the inertial guidance system of the Long March 3B rocket.104 Specifically, they believed the failure was caused by a break in a wire to a torque motor controlling the inner gimbal in the inertial measurement unit. While the Independent Review Committee members told the PRC representatives that they did not necessarily disagree with this analysis, the minutes of the Palo Alto meeting reflect that the committee recommended additional investigation by the PRC to verify its failure analysis.105

During the meeting, the PRC representatives presented information about the Long March 3B rocket design. The Independent Review Committee members asked questions to better understand the technology used by the PRC, as it was not as advanced as Western designs. Hughes Chief Scientist Robert Steinhauer described the afternoon session as a "tutorial." 106

Meeting on April 24, 1996

On April 24, 1996, the PRC representatives attempted to answer some of the questions presented by the Independent Review Committee on the previous day. There was also continued discussion of the launch failure analysis, and plans were made to continue the meeting in Beijing on April 30 and May 1, 1996.107

The Hughes committee members, Steinhauer and Smay, did not attend the meeting on April 24.108

The following is the agenda for the April 24 Palo Alto Independent Review Committee meeting:

9:00 AM REVIEW OF PROGRESS TO DATE IRC

9:30 AM REVIEW OF LM-3/LM-3B DIFFERENCES CGWIC

10:30 AM BREAK

10:45 AM CONTINUE REVIEW OF LM-3/LM-3B CGWIC

12:00 PM LUNCH

1:00 PM ACTION ITEMS FOR LM-3/APSTAR 1A IRC

3:00 PM BREAK

3:15 PM WRAP UP AND PREPARATION FOR BEIJING MEETING IRC

4:00 PM OPEN DISCUSSION ALL

5:00 PM END

United States Trade Representative Meeting on April 23, 1996

On April 23, 1996, Nick Yen, Loral's Intelsat 708 Launch Operations Manager and Secretary of the Independent Review Committee, and Rex Hollis, an employee in Loral's Washington, D.C. office, met with various U.S. Government officials at the offices of the U.S. Trade Representative in Washington, D.C.

In a memorandum prepared by Yen dated May 15, 1996, memorializing this April 23, 1996 meeting, Yen described the purpose of the meeting as an informal briefing on the activities leading up to and including the launch failure.109

According to Yen's memorandum, the U.S. Government representatives at the meeting were interested in the accuracy of claims by the PRC authorities about the extent of the damage caused to a nearby village by the rocket's explosion. They were also interested in the course of action that was being taken to correct safety problems and deficiencies at the launch site.

According to the memorandum, which was prepared after the State Department inquiries about possible export violations by Loral and three weeks after the meeting, Yen mentioned that an independent review committee headed by Wah Lim had been created.110

The memorandum reflected that Yen told the meeting attendees that, since launch site safety related to how the rocket behaves, the Independent Review Committee would review the findings, conclusions, and corrective actions performed by the PRC Failure Investigation Committee, and set the necessary safety implementation requirements for China Great Wall Industry Corporation to consider for its future customers, not just Loral.111

Yen did not tell the attendees that Loral did not have a license to participate in the investigation.

The memorandum stated that one of the U.S. Trade Representative officials, Don Eiss, requested a copy of the Independent Review Committee formal report when it became available. According to the memorandum, Yen told Eiss that he would have to consult with Lim prior to the dissemination of the report. There is no indication that the report was ever disseminated to any of these U.S. Government representatives. The memorandum reflected no substantive discussion concerning the Independent Review Committee report.112

The meeting was not about export licensing for failure analyses, and no U.S. official at this meeting has been identified as an export licensing officer. Loral, in its Voluntary Disclosure, admitted that:

[T]his meeting cannot be taken as U.S. government consent to Loral's activities on the IRC (particularly as the State Department personnel were not from the Office of Defense Trade Controls).113

The April and May 1996 Independent Review Committee Meetings in Beijing

Meeting on April 30, 1996

On April 30, 1996, the second series of Independent Review Committee meetings convened, this time in Beijing. Hughes committee member Robert Steinhauer did not attend this meeting. The committee members stayed at the China World Hotel, and were transported by van from their hotel to the meeting location.

The meeting was held in a large room in a building on the China Great Wall Industry Corporation campus. In attendance were representatives from various PRC aerospace organizations.

According to Independent Review Committee members, various PRC representatives made presentations concerning different aspects of their launch failure investigation.

Many of the committee members say that it was difficult to understand parts of the presentation. In some instances, the presentations were made in Chinese and interpreted for the committee members. Some of the committee members say that, in their opinion, the interpreters did not have technical backgrounds. According to some of the committee members who testified, this lack of technical training contributed to the difficulty in understanding the PRC presentations.

The following is the agenda for the first day of the Beijing Independent Review Committee meeting:

Members' Caucus at the China World Hotel

On the evening of the first day, the Independent Review Committee members and technical staff held a caucus in a meeting room at the China World Hotel. The purpose of the meeting was to discuss the presentations that had been made by the PRC, to consider the possible causes of the launch failure, and to decide on what to present to the PRC participants the following day.

The caucus meeting ran from about 7:00 p.m. to at least 10:00 p.m. No PRC personnel were present. However, according to testimony presented to the Select Committee, the discussion was almost certainly secretly recorded by the PRC.

Topics of discussion included, among others:

o Proposed failure modes o Redundancy o High fidelity testing o Gimbals o Gyroscopes o Torque motors o Telemetry data o The oscillatory behavior of the flight

During the caucus, the Independent Review Committee members expressed views that were incorporated in attachment IV of their Preliminary Report. One committee member described the meeting as a "brainstorming" session.

The same member stated, "I'm sure we felt that we had to get together and try to summarize and understand and agree among ourselves what we thought we had heard and seen that day, and that was the whole idea . . . . It gave us a chance to talk among ourselves and review what we had heard and perhaps raise questions."

Striking is one Independent Review Committee member's admission that there were probably things said in these supposedly closed meetings of the committee that they would not have said in front of the PRC officials.

According to a document reflecting discussions in the caucus meeting, the Independent Review Committee members were focusing on the following failure modes:

o Broken wires in general, as postulated by the China Academy of Launch Technology o Frozen follow-up gimbals, a failure mode not considered by the PRC o Open loop in the feed back path114

As early as February 29, 1996, China Great Wall Industry Corporation had identified that there was a problem with the inertial platform.115 In a March 28, 1996, Information Release from China Great Wall Industry Corporation, the PRC announced that they were one experiment away from completing the simulation experiments on the Long March 3B failure scenarios.116 The Information Release stated that they had analyzed the telemetry data and the failure mechanism. Through this analysis, they had isolated four inertial platform failure modes:

o A broken wire to the torque motor for the inner frame o A blocking of the inner frame axis o An open loop of the follow-up frame o Environmental stress

From its analysis of the telemetry data, China Great Wall Industry Corporation determined that during the 22-second flight of the Long March 3B, there were three distinct cycles, each of which lasted a little over seven seconds. Witnesses at the launch confirmed that the rocket veered three times before impact. China Great Wall Industry Corporation theorized that the rocket veered as the result of a faulty wire (or flawed solder joint) in the inertial platform, which intermittently disconnected and reconnected at the end of each of the three cycles.117

By the time of the Beijing insurance meeting on April 15, 1996, China Great Wall Industry Corporation had eliminated two of the four failure modes identified in March. Specifically, they isolated the problem to the inner frame and posed the following possibilities:

o Electrical circuitry problems: open loop through the inner frame; broken wire; poor contact; or false welding o Mechanical problems: the axis of inner frame clamping; foreign object blocking118

Viewgraphs supplementing their report stated that the inertial platform veered three times during the 22-second flight, and that the first periodic motion occurred in the torque motor on the inner frame axle of the platform.119 China Great Wall Industry Corporation presented similar information to the Independent Review Committee participants at the first meeting of the committee in Palo Alto from April 22 to 24, 1996.

At the second Independent Review Committee meeting in Beijing, China Great Wall Industry Corporation continued to emphasize the inner frame as the problem. In fact, they provided the Independent Review Committee participants a failure tree that specifically eliminated all but the inner frame as a potential failure mode.120

In the words of one Independent Review Committee participant, "I think if they had not had the IRC, they would have sold that one down the line."

The Independent Review Committee was not convinced. First, several committee participants thought the disconnecting and reconnecting wire theory either was not plausible or was "highly unlikely." In addition, China Great Wall Industry Corporation was only able to replicate the first seven to eight seconds of the flight, rather than the full 22-second flight. Finally, China Great Wall Industry Corporation had not resolved a fundamental question as to why the telemetry data in the follower frame was flat, rather than oscillating.121

In a continuing effort to persuade China Great Wall Industry Corporation to explain the behavior of the full 22 seconds of flight, the Independent Review Committee provided comments to the PRC after the first day of the Beijing meeting. The Independent Review Committee stated that "China Academy of Launch Technology should consider to perform a simulation test using an open feed back path as the initial condition. It is also very critical for CALT [China Academy of Launch Technology] to explain why the follow-up gimbal resolve[r] (angle sensor) stayed flat throughout the flight." 122

While the Independent Review Committee generally acknowledged China Great Wall Industry Corporation's proposed failure modes, they did so only after modification. For example, the PRC proposed a "broken wire to the torque motor for the inner frame," while the Independent Review Committee proposed a "broken wire in general as postulated by CALT." While the PRC proposed a "blocking of the inner frame axis," the Independent Review Committee proposed "frozen follow-up gimbals." 123

Meeting on May 1, 1996

May 1, 1996, was the second day of the Independent Review Committee Beijing meetings. The following is the agenda for the second day's of that meeting:

8:20 IRC MEMBERS LEAVE HOTEL CGWIC

9:00 IRC'S REVIEW TO THE ANSWERS IRC 11:00 DETAILED DISCUSSIONS OF LM-3 AND LM-3B FAILURE ALL ISOLATION ANALYSIS AND IMU FOR LM-3 & LM-3B

MANUFACTURING AND TEST PROCEDURE ETC.

12:00 LUNCH BREAK (BUFFET)

13:00 TOUR OF THE ASSEMBLY WORKSHOP OF L/V,

THE IMU TEST FACILITY ALL

16:00 WRAP UP SESSION IRC/CGWIC

17:00 SUMMARY OF FINDINGS TO DATE

AND CONCLUSION IF AVAILABLE IRC

19:00 DINNER HOSTED BY CASC

During the morning session, a "splinter meeting" was held to specifically discuss the inertial platform. The meeting was attended by the five Independent Review Committee members, and a small group of PRC engineers.124 During the meeting, the committee participants sought clarifications concerning the signal flow diagrams in order to determine the cause of the open circuit.

During the Independent Review Committee meetings in Beijing, several of the Independent Review Committee members toured the PRC manufacturing and assembly facilities for the Long March 3B inertial measurement unit. During those tours, the Independent Review Committee members commented to the PRC engineers about the quality control practices used by the PRC. These comments on quality control were reiterated in the Independent Review Committee Preliminary Report sent to China Great Wall Industry Corporation on May 10, 1996.125

The Independent Review Committee Preliminary Report Writing the Report

Upon completion of the Beijing Independent Review Committee meeting on May 1, 1996, the process of writing the report began. Wah Lim delegated the task of writing the major portion of the report to John Holt, the British committee participant, because he seemed to have the best understanding of the issues related to the Long March 3B inertial measurement unit.126

On or about May 2, 1996, Holt faxed his draft summary to Nick Yen, the Secretary of the Independent Review Committee, at Loral. Yen then disseminated Holt's draft summary to the other Independent Review Committee members. The committee members subsequently provided their comments on Holt's draft to Yen and Lim.127

Loral Sends the Draft Report to the PRC

Yen assimilated all of the material into a draft Preliminary Report during the period May 2 to 6, 1996. He completed the draft Preliminary Report around May 6 or 7, 1996. Yen then showed the report to Loral's Wah Lim, the Chairman of the Independent Review Committee. Lim suggested changes, and told Yen to send it to the Independent Review Committee members, and to the China Great Wall Industry Corporation.

On May 7, 1996, Yen distributed the draft Preliminary Report to the Independent Review Committee members and technical staff for additional comments.128

On the same day, Yen also faxed a copy of the draft to China Great Wall Industry Corporation in the PRC.129

According to interview notes of Lim taken by a Feith & Zell attorney, Lim acknowledged that he instructed Yen to send the draft Independent Review Committee report to everyone, including the PRC, on May 7, 1996.130

It should be noted that Lim refused to be interviewed or deposed during this investigation.

The Contents of the Draft Report

The Independent Review Committee's Preliminary Report repeated the committee's concerns that China Great Wall Industry Corporation's conclusions were debatable. As a short-term recommendation, the Independent Review Committee stated:

An explanation of the total flight behavior is essential to fully confirm the failure mode.131 A mathematical numerical solution is recommended immediately, to be followed by a hardware in the loop simulation test when possible . . .132

In addition, the draft Preliminary Report documented the Independent Review Committee's view that an intermittently reconnecting wire - the PRC's theory - was not necessary for the rocket to behave in the manner in which it did.

Specifically, the Independent Review Committee postulated that a single disconnectionÐwithout reconnectionÐwould be "a much simpler, and more plausible, explanation." 133

The Independent Review Committee repeated its concern that "the open circuit could be at various other physical locations," suggesting that the problem might not be in the inner frame,134 as was posited by the PRC.

The Independent Review Committee participants questioned China Great Wall Industry Corporation's assertions that the flat data from the follower frame were bad data.135 They therefore requested that China Great Wall Industry Corporation confirm that the follower frame had functioned properly during flight.

Ten days after China Great Wall Industry Corporation received the Independent Review Committee's Preliminary Report, it abandoned testing of the inner frame, and started vigorously testing the follower frame.

One month later, China Great Wall Industry Corporation determined that the cause of the failure was an open feed back path in the follower frame. This finding was confirmed in a presentation by China Great Wall Industry Corporation to Loral, Hughes, and others in October 1996.

In addition to these observations, the Independent Review Committee document recommended that a "splinter" meeting be held the following day to examine more closely the failure modes related to the inertial guidance system of the Long March 3B.136 John Holt, John Smay, Jack Rodden, Fred Chan, and Nick Yen were selected to participate in the meeting.137

Notification to Loral Officials That a Report Had Been Prepared

On or about May 6, 1996, Lim spoke during a Loral staff meeting about the work of the Independent Review Committee, and mentioned that a report was going to be submitted to the insurance companies on or about May 10, 1996.

Julie Bannerman, Loral's General Counsel, says that she was concerned about the possibility that the company might incur some liability to the insurance companies because Loral employees would be associated with representations that were made in the report. Bannerman advises that, for this reason, she wanted to add a disclaimer to the report.138

Thus, Bannerman believes that she asked Lim to provide her a copy of the report prior to its dissemination, although she has no specific recollection of making the request.139

Bannerman says she does not recall any mention at the Loral staff meeting that the report was being provided to the PRC.140

Loral Review and Analysis of the Independent Review Committee Report

Loral General Counsel Julie Bannerman says that she found a copy of the Independent Review Committee draft Preliminary Report on her desk on May 9, 1996. She does not know who put the document on her desk, but believes that it was probably Wah Lim.141

Bannerman says that she looked at the report and realized that it contained technical information she did not understand. As a result of the concern this caused her from an export control perspective, she says she began preparing a memorandum to send to Loral's outside legal counsel, Feith & Zell in Washington, D.C., for review.142

During the preparation of her memorandum, Bannerman says that she telephoned Loral Export Control Manager William Schweickert because she wanted to mention his April 22, 1996, export briefing in the memorandum. Schweickert provided her with the requested information, which she included in approximately one line in the memorandum, but she does not recall whether she advised Schweickert that a draft report had been prepared by the Independent Review Committee.143

Bannerman says that she faxed her memorandum and the draft Preliminary Report to Mark Feldman, an attorney at Feith & Zell. She did not call Feldman prior to transmitting the document.144

Bannerman says that she was concerned that the draft Preliminary Report might include technical data or defense services that required an export license (which Loral did not have), or that it represented activities that might require a license. However, she says she could not make that judgment. She did not consider it necessary at this point in time to call Lim because "the issue at hand was present in the document." Bannerman advises that she did not speak with Lim on May 9, 1996.145

Bannerman recalls believing that, since the draft Preliminary Report was in her possession, it would not be disseminated outside Loral. Bannerman says that, at this point - May 9, 1996 - she was not aware that the draft Preliminary Report had been disseminated to anyone.146

The Final Preliminary Report is Sent to the PRC

Loral's General Counsel, Julie Bannerman, says that on May 10, 1996, Loral Export Control Officer Duncan Reynard returned from vacation and came to her office. Bannerman showed him the Independent Review Committee report, since she wanted his advice on how to handle the document.147

Bannerman says that Reynard's immediate comments concerned the quality of the report, not necessarily its substance. Bannerman says that she and Reynard called Mark Feldman at Loral's outside counsel, Feith & Zell, to see if he had yet reviewed the report. According to Bannerman, Feldman said that he had reviewed it, was concerned about the structure and apparent purpose of the document, and thought that some issues required resolution.148

Bannerman says she believed the report would not be sent outside Loral until she and Reynard had more information.149

Bannerman says that she and Reynard advised Loral President Berry of the situation, and he concurred in their recommendation not to allow dissemination of the report.150

Bannerman says that her recollection is uncertain on this point, but she believes that Reynard was responsible for preventing any dissemination of the draft Preliminary Report, and was going to talk to Wah Lim about that. Bannerman also believes that she may have called Lim and told him not to disseminate the report. She says that her recollections of the remainder of that day are vague, but that she recalls going home with the understanding that the "mission had been accomplished." 151

Reynard says his recollection is that Bannerman was going to speak to Lim, and he was going to speak with Yen. Reynard says that, after the meeting with Bannerman, he went to Yen's office at approximately 11:30 a.m. that same day, May 10, where he saw a number of reports on Yen's table. Reynard says that Yen confirmed that the documents were copies of the draft Preliminary Report. Reynard says that Yen told him that he was preparing the reports for dissemination to the Independent Review Committee members.152

Reynard says he told Yen that the reports could not go out until Loral had State Department approval, or a license, and that Yen said he understood this. Reynard said he did not ask Yen whether the reports had been sent out, because they were on Yen's desk. Reynard says he took some copies of the report, so that he could show them to U.S. Government officials.153

Yen finished the final Preliminary Report on May 10, 1996. He took it, and a cover letter addressed to China Great Wall Industry Corporation, to Lim for his review. Lim looked at the report quickly and signed the cover letter.

Yen faxed the report to China Great Wall Industry Corporation in the PRC shortly afterward that same day.

Later that day, Lim asked Yen if the report had been sent to the China Great Wall Industry Corporation. When Yen replied that it had, Lim indicated that Loral might have to apply for a license for the Independent Review Committee activity.

Another Copy of the Report Is Sent to Beijing

On May 13, 1996, Lim's office instructed Yen to send the report to Paul O'Connor at J & H Marsh & McLennan in Washington, D.C. After receiving the report in its Washington office, J & H Marsh & McLennan requested the report be faxed to O'Connor in Beijing. Apparently Lim specifically approved faxing the report to O'Connor in Beijing.

Lim's May 13, 1996, letter transmitting the final Independent Review Committee Preliminary Report to O'Connor says, in part:

This [Report] will not be delivered to CGWIC [China Great Wall Industry Corporation] and its launch service agencies until the export license or an equivalent authorization is obtained." 154

This letter is inconsistent with Yen's having already transmitted the draft Report to China Great Wall Industry Corporation six days earlier, on May 7. It is also inconsistent with Lim's letter three days earlier, on May 10, transmitting the final Independent Review Committee Preliminary Report to China Great Wall Industry Corporation, which was faxed to the PRC on that date by Yen.

It should be noted that Lim refused to be interviewed in this investigation, despite the issuance of a subpoena.155 Moreover, the Department of Justice has requested that further details of this aspect of the Select Committee's investigation not be publicly disclosed because it would compromise the criminal prosecution of Loral, Hughes, and their employees. Since the details can be made public as part of such a prosecution, the Select Committee has agreed to this request.

Loral Management Actions After Delivery of the Report to the PRC

Loral General Counsel Bannerman recalls a meeting in Loral President Berry's office, possibly on May 14, 1996, concerning the Independent Review Committee matter.

Bannerman believes that Loral's Executive Vice President, Pat Dewitt, may have called the meeting to discuss a May 14, 1996, memorandum prepared by Loral Export Control Manager Reynard. The memorandum raised concerns about possible violations of the International Traffic in Arms Regulations on the part of Loral.156

Loral President Berry and Weh Lim, the Chairman of the Independent Review Committee, were also present at the meeting.

During the meeting, Bannerman says Dewitt was concerned about whether or not the Preliminary Report had been disseminated. She says he asked Lim to confirm that it had not.157

Bannerman says Lim made a telephone call at that point in the meeting, but she does not know to whom. Bannerman does not recall that Lim actually confirmed at this meeting that the Preliminary Report had not been sent. However, she says the meeting participants "received the message" that Lim had stopped the report from being disseminated.158

Bannerman believes a meeting was set up for the following day, May 15, 1996, in order to receive a telephone report from Reynard, who was in Washington meeting with U.S. Government representatives concerning the report.159

Reynard says he recalls the meeting on May 14, 1996, in Berry's office, during which he gave copies of a memorandum he prepared to Bannerman, Berry, and Dewitt.160

Reynard says the purpose of the memorandum was to get people's attention on the Independent Review Committee report and necessary action. He says the bold print in the memorandum indicated that he was strongly trying to get people's attention. The final page of the memorandum contained recommended courses of action.161

One of the memorandum topics concerned an article that appeared in Space News. The article reported that the Independent Review Committee's report had been released to the PRC on May 10, 1996. Reynard says that he considered the article to be inaccurate because, to the best of his knowledge, the report had not been released.162

Another topic of the memorandum concerned possible violations of the International Traffic in Arms Regulations, but Reynard does not think there was any "real" discussion of that specific concern at the meeting.163

Reynard says that at this point he did not know the report had been disseminated to the PRC. Reynard says the meeting did not last long, and that Berry told him at the meeting to go to Washington and to do whatever was necessary regarding the Independent Review Committee's report.164

On May 14, 1996, Yen received a call from Lim requesting that Yen be present at a meeting on May 15, 1996, in Berry's office. The purpose of the meeting was to have a telephone conference with Reynard, who was in Washington meeting with State Department and Defense Technology Security Administration officials regarding the Independent Review Committee activity.

Defense Department Official Discovers the Activities of the Independent Review Committee

After reading an article in Space News that described Loral's involvement in a launch failure investigation, Defense Technology Security Administration official Robert Kovac called Loral's Washington Representative, Harold Bradshaw, on or about May 14, 1996. Kovac inquired about the license that Loral relied upon to conduct the investigation. When Bradshaw could not provide an answer to Kovac's question, a meeting was scheduled for May 15, 1996.165

Meeting with the Defense Technology Security Administration

On May 15, 1996, Loral's Reynard and Bradshaw met with Kovac and two other officials of the Defense Department's Defense Technology Security Administration. Later that day, Reynard and Bradshaw met with representatives of the State Department's Office of Defense Trade Controls.

At the meeting with the Defense Department officials, the Defense Technology Security Administration reviewed the Preliminary Report and expressed concerns about the technical data it contained.

The Defense Technology Security Administration participants were shocked that the Preliminary Report contained references to technical discussions with the PRC concerning inertial navigation systems. Kovac told the Loral representatives that, in his opinion, Loral had potentially violated the law and was in the process of violating it "big time" by providing the report to the PRC.

Kovac specifically asked Reynard whether the document had been provided to the PRC. Reynard replied that it had not. But it had, he said, been disseminated to the Independent Review Committee members.

Kovac specifically advised that Loral should submit a voluntary disclosure to the State Department.

Kovac had follow-up conversations with Bradshaw, but no other conversations with Reynard.

In Kovac's opinion, the State Department DSP-5 license, No. 544593, issued to Loral for the export of technical data in support of technical discussions for the launch of an Intelsat VIIA satellite, did not allow Loral to provide any technical assistance to the PRC.

Meeting with the State Department

On May 15, 1996, following their meeting with the Defense Technology Security Administration. Loral's Reynard and Bradshaw met with Dr. Kenneth Peoples, the State Department licensing officer for the Intelsat 708 satellite launch.

Bradshaw had asked for a meeting at the State Department's Office of Defense Trade Controls to discuss Loral's involvement in a failure analysis with the PRC.

Based on Loral's presentation about the launch failure investigation of the Intelsat 708 satellite, Peoples believed there was a serious possibility the International Traffic in Arms Regulations had been violated.

Peoples recommended that Loral provide a letter to William Lowell, Director of the State Department's Office of Defense Trade Controls, concerning the matter. Loral subsequently delivered a box of documents relating to this matter to the State Department.

Reynard's Telephone Call to Loral

On May 15, 1996, Loral officers Bannerman, Berry, Yen, and Dewitt - but not Lim - were present in a meeting room at the company to receive a telephone call from Loral's Export Control Officer, Duncan Reynard, who was in Washington. Bannerman recalls that Reynard called and briefed them on his meeting with U.S. Government officials.166

Bannerman's recollection is that the meeting was related to the Independent Review Committee. However, she does not recall whether the meeting was convened to initiate discussions about instituting a Loral investigation of the Independent Review Committee matter, or whether the purpose was to just to speak with Reynard.

Bannerman says that they (Loral) got the message that all Independent Review Committee activity should be ceased.167

Bannerman says she has no recollection of any discussion during this meeting about whether the Independent Review Committee report had been sent to the PRC. Bannerman's recollection is that it was decided that Loral would initiate an investigation into the matter upon Reynard's return from Washington.168

Bannerman says the message received from Reynard during this meeting was that Loral was not only to stop all Independent Review Committee activity, but also to retrieve all copies of the documents that had been disseminated. Bannerman says she cannot recall Reynard making any comments about whether the Independent Review Committee report had been disseminated to the PRC.169

Bannerman says that Yen was present for Reynard's telephone call, and that Yen did not say that he had disseminated the Independent Review Committee report to the PRC.170

Others present also recall that Reynard said that the Independent Review Committee was not a good idea, and that Loral should prepare a voluntary disclosure.

After the telephone conference with Reynard ended, Lim asked Yen to retrieve the Independent Review Committee reports that had been distributed to the foreign committee members. But Lim did not ask Yen to retrieve the copies that had been sent to the other Independent Review Committee members, or to China Great Wall Industry Corporation.

Bannerman says she has no specific recollection of meeting with Reynard upon his return from Washington. However, she believes she probably did, and that Reynard initiated a preliminary investigation into the matter.171

Loral Management Discovers the Independent Review Committee Report Has Been Sent to the PRC

Bannerman says that Reynard told her on May 20, 1996, that Yen had admitted earlier that day he had disseminated the report to the PRC.172

Reynard advises that he confronted Yen in a small office at Loral, and asked him directly whether he had disseminated the report. Yen admitted, says Reynard, that he had transmitted the report to the PRC on May 10, 1996.173

Reynard says he did not ask Yen why Yen had not told anyone at Loral previously that he had disseminated the document to the PRC.

After receiving the information that the report had been sent to the PRC, Bannerman believes she advised Pat Dewitt, Loral's Chief Financial Officer, about the situation. She says she does not remember whether they told Berry about the matter at this time.174

Bannerman recalls making a decision that she wanted outside counsel to conduct an investigation, and that she did not interview Lim or Yen about the matter because outside counsel was going to investigate. Bannerman says she believed that the matter required delicate handling.175

Loral's ÔVoluntary' Disclosure Investigation by Loral's Outside Counsel

From May 29 through 31, 1996, an attorney from Loral's outside counsel for export matters, Feith & Zell, visited Loral's facility in Palo Alto and interviewed almost all of the Loral personnel referred to by name in the disclosure. Two Feith & Zell attorneys returned to Palo Alto from June 4 through 6, 1996, to hold follow-up interviews and review additional documents. Feith & Zell eventually completed the investigation and prepared a disclosure that was submitted on June 17, 1996, to the State Department.176

Loral Submits Its ÔVoluntary' Disclosure to the State Department

The disclosure by Loral chronicles the company's version of the involvement of Loral personnel in the Intelsat 708 launch failure investigation. It analyzes the Independent Review Committee meetings held in both Palo Alto and Beijing, as well as the preparation and dissemination of the Preliminary Report.177

This submission was in response to a May 29, 1996 letter from William Lowell of the State Department, advising Eric Zahler, General Counsel of Loral Space and Communication, Loral's parent corporation, that there was reason to believe that Loral may have participated in serious violations of the International Traffic in Arms Regulations by providing unauthorized defense services to the PRC in connection with the February 1996 launch failure investigation.178

Lowell recommended that Loral:

o Take immediate steps to cease all related activity that may require approval o Provide a full disclosure o Enumerate all releases that were controlled under the International Traffic in Arms Regulations179

The following outlines the substance of Loral's Voluntary Disclosure and its appendices and exhibits.

Outline of Loral ÔVoluntary' Disclosure

Summary - Nature Loral's disclosure claims that the Independent Review and Extent of Issues Committee's activity raises three questions:

(1) Did Loral furnish China Great Wall Industry Corporation with "technical data";

(2) did Loral furnish China Great Wall Industry Corporation with a "defense service";

(3) did Loral furnish non-U.S. members of the Independent Review Committee with "technical data"

Identities and Addresses of List of all persons and organizations involved in the Independent Review Committee matter (Appendix B)

Individuals and Organizations

Export License Numbers

Licenses for the Intelsat VIIA satellite program.

There is no Technical Assistance Agreement authorizing Independent Review Committee activity.

Munitions List Items

Loral's disclosure that a central issue is whether the Independent Review Committee activities constituted a "defense service" in connection with a rocket.

Facts and Circumstances

An outline is presented of Loral's involvement in the Independent Review Committee activities.

Summary of Key Mistakes

Loral acknowledges it was a serious mistake to not seek prior State Department approval. Loral notes that Government Security Committee instructions regarding the need to seek advance State Department approval were not followed. Loral acknowledges that the export control briefing at first Independent Review Committee meeting was deficient, and that the Preliminary Report was sent to China Great Wall Industry Corporation without any review by Loral export control staff.

Corrective Actions

The thrust of corrective measures proposed is:

a. improve export control training of all Loral staff who engage in or authorize communications with foreign persons b. tighten procedures to ensure communication and follow-up between Loral export control staff and program staff c. reinvigorate corporate policy on the priority of export control law compliance

Mitigating Factors

Loral claims as mitigating factors, if the State Department should find that Loral violated export regulations, that the Government Security Committee functioned well. Any wrongdoing, Loral claims, was unintentional; they had no intent to provide technical assistance to China Great Wall Industry Corporation; there was minimal harm to U.S. interests; Loral takes compliance seriously; and they are taking corrective measures.

Conclusions

Loral acknowledges that several deficiencies had been revealed in Loral's export control procedures. Loral claims its staff acted in good faith. Loral asserts the harm to U.S. interests appears to have been minimal.

Supporting Material with Loral ÔVoluntary' Disclosure

Appendix A Certification by Loral President, Robert Berry.

Appendix B List of all persons and organizations involved in the Independent Review Committee matter.

Green Binder Copies of all materials furnished by the Independent Review Committee members to China Great Wall Industry Corporation.

Blue Binder (3 volumes)

Copies of all materials furnished to the Independent Review Committee by China Great Wall Industry Corporation.

Yellow Binder Miscellaneous materials.

Red Binder Loral export procedures and training materials.

Loral's disclosure to the State Department was silent as to why Yen disseminated a draft copy of the Independent Review Committee Preliminary Report to China Great Wall Industry Corporation on May 7, 1996.

Also, no reason was provided as to why Yen disseminated the final version of the Independent Review Committee Preliminary Report to China Great Wall Industry Corporation on May 10, 1996.

In addition, Loral's disclosure failed to identify - among other issues - the following facts:

o During the time in which the Independent Review Committee was formed and conducted its activities, Loral did not adequately staff its export control function.180 o In January 1995, Loral assigned responsibility for drafting its "Export Control Operating Procedures" by January 25, 1996. As of July 1996, those procedures had not been drafted.181 o Even though the issue of Loral's participation in the Independent Review Committee was discussed at the April 11, 1996 Government Security Committee meeting, no one communicated the substance of that discussion to any of the participants in, or to the Chairman of, the Independent Review Committee. o No one, other than the participants in the Independent Review Committee, ascertained the type and extent of the Independent Review Committee's failure review activities.182 o No one conducted any research to determine whether the intended activities of the Independent Review Committee were legal or consistent with Loral's company policy.183 o Adequate notice was not given regarding the impending visit of PRC engineers to Loral's facility in Palo Alto.184 o Loral failed to adequately review the export control briefing to be delivered to the Independent Review Committee, even though the drafter of that briefing had never prepared an export control briefing in connection with a failure review.185 o No one ensured that the delivery of that briefing to the participants of the Independent Review Committee was adequate.186 o At the time of the first Independent Review Committee meeting in Palo Alto, Loral's President, Executive Vice President, and Export Control Manager traveled to Europe in connection with an unrelated business trip and vacation.187 o No one monitored the Independent Review Committee's failure review activities in the PRC.188 o Once it was determined that a report had been drafted, no one effectively communicated to the responsible Loral employees that the report should not be transmitted to the PRC prior to review by Loral's General Counsel or the U.S. Government.189 o Officers at Loral's parent, Loral Space and Communications, Ltd., were not involved in oversight of Loral's participation in the Independent Review Committee and acknowledge that they were distracted by other business matters, primarily the sale of Loral's defense assets to Lockheed Martin.190 o No one was reprimanded, subjected to the company's administrative action, or fired in connection with the matter.191

The ÔVoluntary' disclosure failed to disclose the following indications that Loral employees were generally aware of the export restrictions related to failure reviews:

o Nick Yen, the Independent Review Committee Secretary, was aware of the export control hazards that attended failure reviews, as evidenced by the fact that he had reported his concerns regarding Hughes' participation in the 1995 Apstar failure review.192 o The technical data license for the Intelsat 708 stated: "The contractor must not provide any technical assistance whatsoever to its Chinese counterparts which might assist China to design, develop, or enhance the performance of any of its contemplated or existing space launch missiles or facilities." 193 o Numerous Loral personnel, including the Executive Vice President, General Counsel, Export Control Manager, and Yen, were aware of, or participated in, contemporaneous discussions with the State Department regarding the permissible bounds of Loral participation in PRC failure analyses. These discussions were embodied in an April 3, 1996 Loral proposal to the State Department of license language that would restrict Loral's participation in possible failure analyses in connection with the upcoming Mabuhay and Apstar Long March launches. Loral's proposal was that it would not comment or ask questions in the course of any such failure analyses.194 o On or about January 24, 1996, a few weeks prior to the Intelsat 708 failure, Loral received and reviewed the Apstar technical data export license issued to Loral by the U.S. Government. The license barred Loral from passing any technical data to the PRC in connection with a failure investigation. The license stated: "[D]elete any discussion or release under this license of any technical data concerning launch vehicle [i.e., rocket] failure analysis or investigation." 195 This came to Loral senior management's attention shortly after the license was received. o On or about February 22, 1996, a week after the Intelsat 708 failure, Loral received and reviewed the Mabuhay technical data export license issued to Loral by the U.S. Government. The license barred Loral from passing any technical data to the PRC in connection with a failure investigation. The license stated: "[D]elete any discussion or release under this license of any technical data concerning launch vehicle [i.e., rocket] failure analysis or investigation." 195 This came to Loral senior management's attention when the license was received.

The Loral disclosure acknowledged that it was a serious mistake not to have sought State Department approval for the Independent Review Committee activities. The disclosure did not admit to any violations of the International Traffic in Arms Regulations, although it recognized that the issue of assistance to China Great Wall Industry Corporation raised problems under these regulations. The disclosure advised that Loral's policy was to seek State Department approval before proceeding with activities such as the Independent Review Committee.197

The disclosure stated that Loral was taking a series of corrective actions to ensure that similar mistakes do not happen again. The thrust of those measures was to:198

o Improve export control training of all staff who engage in or authorize communications with foreign persons. o Tighten procedures to ensure communication and follow-up between export control staff and program staff. o Reinvigorate the corporate policy that compliance with export control laws and regulations takes priority over business concerns.

The PRC Gives Its Final Failure Investigation Report

On October 21 and 22, 1996, China Great Wall Industry Corporation made its final launch failure presentation to officials at Loral.199 The meeting was sponsored by Loral's Mabuhay Program, which subsequently launched the Mabuhay satellite on the Long March 3B rocket on August 19, 1997.

On September 10, 1996, China Great Wall Industry Corporation had announced its final failure determination: that the cause of the February 11, 1996 Long March 3B crash was the absence of current output from the servo-loop of the follow-up frame of the inertial guidance platform.200

It should be noted that the follow-up frame failure mode had been rejected by China Great Wall Industry Corporation during the Beijing Independent Review Committee meetings.201 Yet, even though this mode had been rejected by China Great Wall Industry Corporation during the Beijing meetings, the Independent Review Committee included it in its final Preliminary Report as a possible failure mode.202

During the October 21 and 22, 1996 Long March 3B failure review presentation at Loral, China Great Wall Industry Corporation produced documents that showed it had started testing for the follow-up frame failure mode on or about May 20, 1996 - slightly more than two weeks after the conclusion of the Beijing Independent Review Committee meetings, and ten days after receiving the Independent Review Committee's Preliminary Report.203

China Great Wall Industry Corporation finished testing the follow-up frame failure mode on or about June 20, 1996.

Assessments by U.S. Government Agencies and Referral to the Department of Justice

Loral and Hughes each submitted information to the State Department in their disclosures regarding the Independent Review Committee. The State Department reviewed this material, and generated an assessment of the information contained in the documents that were submitted.

The State Department also asked the Department of Defense and CIA to review the materials and generate their own assessments.

The Defense Department conducted two analyses: one in August 1996, and another - by the Defense Technology Security Administration - in May 1997.

The Central Intelligence Agency provided views to the State Department in June 1996, but limited its analysis to proliferation concerns. In addition, in 1998 an interagency review team was asked to address a subset of questions that remained after the earlier assessments.

Defense Department 1996 Assessment

In August 1996, the Department of Defense prepared a classified assessment of the Independent Review Committee materials. That assessment reported that the Defense Department would have recommended against issuing a license for the sharing of technical information with the PRC by Loral and Hughes. It concluded that there existed the potential for moderate harm to national security interests.

The assessment cited 18 violations that it believed had occurred during the Independent Review Committee's exchanges of information with the PRC. These examples were taken from the minutes of the second Independent Review Committee meeting, and from the draft and final versions of the Preliminary Report.

In conclusion, the Department of Defense assessment stated:

It is likely that the all-Chinese Failure Analysis Team [PRC] pursued recommendations made by Independent Review Committee in its draft report . . . and that the pursuit of these recommendations directly resulted in the Chinese team finding the correct cause of failure in the Long March 3B guidance system . . .

Evidence suggests that the Independent Review Committee very likely led the Chinese to discover the true failure of the Long March 3B guidance platform.204

Central Intelligence Agency Assessment

On June 17, 1996, the Central Intelligence Agency reported to the State Department that the Independent Review Committee report did not disclose any significant missile-related technology or know-how to the PRC's ballistic missile program. The Central Intelligence Agency judged that the Independent Review Committee's actions posed no proliferation concerns. The Central Intelligence Agency assessment was based on a review of the Independent Review Committee's preliminary report that State had received from Loral and focused only on proliferation concerns related to the PRC's ballistic missiles.

Department of State Assessment

On March 25, 1997, the State Department, after considering the views of the other agencies, reported its assessment of the Independent Review Committee's materials. That report stated: "[State] believes information passed to China . . . could significantly improve the manufacturing, production, reliability, and maintainability" of the Long March 3B guidance system.

Defense Technology Security Administration 1997 Assessment

The Defense Department's Defense Technology Security Administration issued a classified assessment of the Independent Review Committee activities on May 16, 1997. That report stated:

Loral and Hughes committed a serious export control violation by virtue of having performed a defense service without a license in the course of conducting an investigation for China of the failure of the February 1996 launch of the Long March 3B.

This activity also violated the U.S.-China Space Launch Technology Safeguards Agreement.

The defense service consisted of a full range of investigatory, engineering and corrective analyses to assist the Chinese in identifying the root cause of the failure and corrective measures.

The significant benefits derived by China from these activities are likely to lead to improvements in the overall reliability of their launch vehicles [i.e., rockets] and ballistic missiles and in particular their guidance

systems.205

Based on its assessment, the Defense Technology Security Administration recommended that the matter be referred to the U. S. Department of Justice for possible criminal investigation.

Interagency Review Team Assessment

In 1998 an interagency review team was asked to respond to questions regarding the Long March 3B and its guidance system. At the conclusion of the Select Committee's investigation, the interagency review team's conclusions remained in draft form. However, members of the team briefed the Select Committee staff and provided documents requested by the Select Committee.

The technical issue of greatest concern to the interagency review team was that the Independent Review Committee exposed the PRC to Western diagnostic processes. In addition, the Independent Review Committee provided the PRC with alternative possible causes of the failure that the PRC had apparently not previously considered in their investigation.

The interagency review team also found that the Independent Review Committee outlined for the PRC the general approach to isolating the true failure mode. This may have been of significant help to the PRC, and may have led it to discover the true failure mode more quickly. This could have prevented a failure in one or more subsequent rocket flights involving the same guidance system. (The Long March 3A, 3B, and 3C rockets all use the same guidance system.)206

More important still, the team members believed, was the exposure to the diagnostic test process outlined by Loral and Hughes that could improve PRC pre-flight and post flight failure analysis for their ballistic missile programs. This, in turn, could increase future ballistic missile reliability.207

Outline of What Was Transferred to the PRC

During their engagement, the Independent Review Committee members communicated with the PRC in several ways:

o In-person conversations o In-person briefing presentations o Written questions and answers o Provision of other written materials: + Briefing charts + Meeting minutes + Agendas + Independent Review Committee charter and membership + Independent Review Committee Preliminary Report208

The written records of these communications have been scrutinized by the several U.S. Government agencies that generated assessments of the Independent Review Committee's activities.

Independent Review Committee Meeting Minutes

The minutes for the Independent Review Committee meetings in Palo Alto and in Beijing contained questions, answers, action items, Independent Review Committee comments, agendas for the next meeting, and an Independent Review Committee preliminary assessment.209 They were transmitted to China Great Wall Industry Corporation as follows:210

o On April 25, 1996, Yen faxed the minutes of the Independent Review Committee meeting in Palo Alto, California, to China Great Wall Industry Corporation.211 o On May 6, 1996, Yen faxed the minutes of the Independent Review Committee meetings in Beijing to China Great Wall Industry Corporation.212

Independent Review Committee Preliminary Report

The Independent Review Committee Preliminary Report, and a draft version, were transmitted to the PRC in May 1996, as follows:

o On May 7, 1996, Yen faxed a draft of the Preliminary Report to China Great Wall Industry Corporation, as well as to the Independent Review Committee members.213 o On May 10, 1996, Yen faxed the final version of the Preliminary Report, less attachments, to China Great Wall Industry Corporation. He shipped complete copies to all Independent Review Committee members via express-mail.214 o On May 13, 1996, Yen faxed the final Independent Review Committee Preliminary Report to a hotel in Beijing for Paul O'Connor of the J & H Marsh & McLennan insurance brokerage firm.215

Loral's Inaccurate Instructions on Releasing Public Domain Information to Foreigners

During a brief presentation at the first Independent Review Committee meeting in Palo Alto, the Loral Technology Transfer Control Manager gave instructions to the committee members regarding the dissemination of public domain information to the PRC.216 Statements from State Department officials indicate that the Loral instructions were not accurate. Other elements of the Loral Technology Transfer Control Officer's presentation, not addressed here, were also inadequate.

Instructions to the Independent Review Committee Regarding Public Domain Information

When, on April 22, 1996, the Independent Review Committee met for the first time at the offices of Loral in Palo Alto,217 one of the first speakers was Loral's Technology Transfer Control Manager, William Schweickert. Schweickert presented a two-page briefing on technology export control as it applied to the Independent Review Committee.

Two of the Independent Review Committee members were not present at that time, and the PRC visitors also were not present.218

The first page of the briefing material began by stating that Loral did not have an export license covering the Independent Review Committee failure review in which the audience was participating.219

It went on to list what could be done by the Independent Review Committee without a license. This list included:

o "Receive technical information from CGWIC [China Great Wall Industry Corporation]" o "Request clarification" o "Ask questions" o "Indicate acceptance or rejection of conclusions" o "Discussions must be limited to the data presented or to information in the public domain" 220

The second chart listed the activity the Independent Review Committee could not engage in without a license. This list included:

o "Disclosure of launch vehicle/satellite detail design, manufacturing processes or computer source code data" o "Disclosure of analytical tools, methodology, algorithms not in the public domain" o "Disclosure of information that will enhance the launch site facilities or launch vehicle/missile capabilities of the PRC" 221

The instruction in the briefing chart that said, "discussions must be limited to the data presented or to information in the public domain" indicates that the Independent Review Committee members can freely discuss information in the public domain.222 This statement was not correct.

State Department Views on Public Domain Information

In general, a U.S. citizen may transfer public domain information to a foreign national. However, such a transfer is not allowed if it occurs in the performance of a defense service, which is defined in Part 120 of the International Traffic in Arms Regulations.

In a defense service, a person or a company does a service for, or on behalf of, a foreign party, directly related to a commodity on the munitions list.

The expertise and experience of the person making the disclosure, and the circumstances of the disclosure, are important in determining whether a defense service has been performed through such a disclosure. As an example, simply giving a foreign national an article from the Encyclopedia Britannica is not an export requiring a license. If, however, the article is provided to a foreign national by an experienced engineer in the context of specific technical discussions, a defense service that requires a license may have been performed.

Thus, it is possible to perform a defense service while using only public domain information. A person with technical expertise or experience may guide or shape a discussion, leading it in some way by using the public domain information that is being provided. In this way, the person may convey some knowledge, some ability, or some expertise, and thus may be performing a defense service.

The Defense Department Concludes the Independent Review Committee's Work Is Likely to Lead to the Improved Reliability of PRC's Ballistic Missiles

The Defense Technology Security Administration stated in its 1997 assessment of the Independent Review Committee activities that "[t]he significant benefit derived by China from these activities are likely to lead to improvements in the overall reliability of their launch vehicles [rockets] and ballistic missiles and in particular their guidance systems." 222

The Defense Department 1996 assessment stated:

The [Independent Review Committee] second meeting minutes provides two alternate causes for the guidance system failure that were previously ruled out or not cited by [the China Academy of Launch Vehicle Technology].

Furthermore, [the Independent Review Committee] recommends specific testing to confirm/deny these alternative causes that otherwise would likely not have been done by China.

If true failure turns out to be one of these alternatives, then the [Independent Review Committee] will have solved the guidance problem for [the China Academy of Launch Vehicle Technology] and possibly prevented a future failure of a [rocket] or developmental missile.

The Defense Department 1996 assessment further stated:

The [Independent Review Committee] Preliminary Report recommends specific guidance platform problems that should be studied and fixed. This could improve the success of their guidance platforms for [rockets] and missiles.

The Long March 3B Guidance System and Ballistic Missiles

The Long March 3B guidance system is judged by the Select Committee to be among the systems capable of being adapted for use in the PRC's planned road-mobile intercontinental ballistic missiles. According to the Select Committee's technical expert, the lightweight and compact design of the Long March 3B guidance system makes it among the systems capable of being used on a small, solid-propellant missile like the PRC's DF-31 intercontinental ballistic missiles. The accuracy of the Long March 3B guidance system is sufficient to target U.S. cities, although there is no basis for assuming greater guidance accuracy than would be achieved with larger, heavier inertial measurement units such as those used on the PRC's currently deployed CSS-4 intercontinental ballistic missile. If the Long March 3B inertial measurement unit were utilized on an intercontinental ballistic missile (ICBM), its advantage would be its lower cost, smaller size, lighter weight, and proven track record. Its disadvantage would be that the Long March 3B inertial measurement unit would require modification to be rugged enough for use on the road-mobile DF-31. If another, better system is available, however, it is more likely to be chosen for that mission.

The interagency review team, in its July 1998 assessment, stated that the advice given to the PRC by the Independent Review Committee could reinforce or add vigor to the PRC's design and test practices. In December 1998, the U.S. Government internally reported that the Independent Review Committee may have improved the reliability of the Long March 3B guidance system and, by extension, other rockets that use this guidance system. And if the PRC acquired or developed a manufacturing or testing process for their rocket program that could benefit their missile programs, they could incorporate it into those programs.

The Cross-Fertilization of the PRC's Rocket and Missile Design Programs

Chang Yang attended both the Palo Alto and Beijing Independent Review Committee meetings. Chang, an engineer, is the Vice-Director of the Beijing Institute of Control Devices. Given the cross-fertilization between the PRC's rocket guidance system designers and intercontinental ballistic missile guidance system designers, Chang's participation in the Independent Review Committee likely ensured that any significant information imparted by the Independent Review Committee members was used to improve the PRC's ballistic missile systems. Chang certainly could have passed on significant information to the engineers working on ballistic missile guidance systems.

The interagency review team found that the technical issue of greatest concern was exposing the PRC to Western diagnostic processes, as suggested by Loral and Hughes.223 This exposure could improve the PRC's pre- and post-flight failure analysis for their ballistic missile programs. This, in turn, could increase the PRC's future ballistic missile reliability.224

The interagency review team also reported that the Independent Review Committee provided the PRC with alternative possible causes of the failure that the PRC had apparently not previously considered, at least to that point in their investigation.225

Finally, the interagency review team reported that advice given to the PRC by the Independent Review Committee could help to reinforce or add vigor to the PRC's adherence to good design and test practices.226 This information could be used by the PRC to assess the failure of any future ballistic missiles or rockets.227

The Defense Technology Security Administration determined that:

The IRC's activities encompassed a wide range of investigatory, engineering, and corrective analyses, including the provision of "Action Items" identifying additional research and testing approaches and specific recommendations for improvement in [rocket] design, manufacturing, testing and quality assurance processes.228

Because of the level of interaction between the China Academy of Launch Vehicle Technology's rocket and intercontinental ballistic missile programs and the affiliations of the PRC members involved in the Independent Review Committee, the experience gained in diagnostic and failure investigation techniques during their participation in the Independent Review Committee could assist the PRC in its future rocket and ballistic missile development and testing programs.

The Independent Review Committee Aided the PRC In Identifying the Cause of the Long March 3B Failure

China Great Wall Industry Corporation's final investigation report indicated that the true failure mode was discovered by the end of May 1996 after repeated tests and analysis. China Great Wall Industry Corporation reported that the root cause of the failure was most probably the lack of output in the three gold-aluminum engagement joints inside the power amplifier module (HMS501J) for the servo-loop of the follow-up frame. The PRC final investigation report said, "the joint deterioration caused the loop failed to work [sic]." 229

The Defense Technology Security Administration assessment of the Independent Review Committee activities stated: "[The Department of Defense] considers it highly probable that, as a result of the [Independent Review Committee's] activities, the PRC has determined the root failure cause and is making progress toward correcting underlying design, manufacturing, test and quality assurance processes for the [Long March 3B's] guidance unit." 230

The interagency review team assessed in July 1998 that the true failure mode may have been discovered more quickly by the PRC as a result of the Independent Review Committee's report.231

According to the Department of Defense, the Independent Review Committee very likely led the PRC to discover the true failure of the Long March 3B guidance system:

Stating it simply, it can be shown that before [the] IRC [Independent Review Committee], the Chinese team had narrowed the most-probable failure scenario to a particular area of the inertial platform (inner frame gimbal).

It can also be shown that in the IRC draft report delivered to China, that the IRC pointed out that the failure could also be in two other places (namely the follow-up frame gimbal or in an open-loop feedback path) and stated that China should explain some as-yet unexplained data output (concerning the follow-up frame); [the] IRC went on to recommend that China perform tests that would prove/disprove all three scenarios.

It can be shown that after the IRC report (and suspension of IRC activities), the Chinese team performed specific tests for these scenarios, and that shortly after the IRC report, these tests resulted in the Chinese team ruling out their original failure scenario (the inner frame gimbal) and resulted in isolating the follow-up frame gimbal as the source of the failure.232

The PRC Implemented All of the Independent Review Committee's Recommendations

At the Pre-Shipment Review on April 14, 1997 for the upcoming PRC launch of Loral's Mabuhay satellite, the China Academy of Launch Vehicle Technology announced that it was taking 44 corrective actions to address the cause of the Long March 3B failure.

These corrective measures included discarding all remaining HMS501J power amplifier modules from the batch used on the Long March 3B flight that failed.233

All of the Independent Review Committee's recommendations from its Preliminary Report are addressed by these 44 corrective actions. Selected recommendations and PRC corrective actions are detailed on the overleaf:234

Loral Recommendations Chart

PRC Corrective Actions Address Independent Review Committee Recommendations

China Academy of Launch Technology Independent Review Committee Corrective Action Recommendation Addressed*

7) "Platform's acceptance test Short Term #4: Improve will be stricter, and the acoustic environmental testing. test will be involved in the acceptance tests...."

9) "All of the platform's movable Short Term #2: Study detailed connections will adopt design of torque motor and wiring double-jointed and double-wired to reduce impact of harness motion connection, such as the torque or deflection of solder joints. motor's brushes. As for fixed connections, double-jointed and Long Term #2: Review designs and double-wired connections will be avoid single point failures Ð adopted as many as possible." increase redundancy.

10) "The conductive slip ring is Short Term #2: Study detailed one of the important components design of torque motor and wiring inside the platform ... CALT had to reduce impact of harness motion adopted measures to increase the or deflection of solder joints. conductive slip ring's reliability, and upgraded Long Term #2: Review designs and reliability technology and avoid single point failures Ð screening measures to guarantee increase redundancy. its normal working status."

11) "CALT had increased grounding Long Term #2: Review designs and points of platform's power supply avoid single point failures Ð circuits. All of the platform's increase redundancy. four stabilization circuits will be triple-redundantly powered."

15) "To improve soldering Short Term #2: Study detailed technology, tooling and working design of torque motor and wiring environment to operate and detect to reduce impact of harness motion easier. For example, adding or deflection of solder joints. special tooling, strengthening inspection measures to assure the Short Term #3: Improve quality welding quality." control in manufacturing.

Long Term #1: Strengthen quality control practices and training.

16) "To strengthen soldering Short Term #3: Improve quality quality check, including control in manufacturing. pre-soldering raw material detect, post-soldering non-destructive Long Term #1: Strengthen quality tension test and sampling control practices and training. destructive test for key parts."

33) "To strengthen flight resume Short Term #4: Improve criterion after failure." environmental testing.

34) "To supervise the Short Term #3: Improve quality manufacturing of key/critical control in manufacturing. elements so as to assure its quality." Long Term #1: Strengthen quality control practices and training.

36) "To strengthen design review." Short Term #3: Improve quality control in manufacturing.

Long Term #1: Strengthen quality control practices and training.

37) "To strengthen technical Long Term #1: Strengthen quality exchange among all Long March control practices and training. families."

38) "To strengthen education of Short Term #3: Improve quality quality control to all of the control in manufacturing. employees and to link their incomes with quality." Long Term #1: Strengthen quality control practices and training.

40) "To improve safety control Short Term #5: Improve range measurement in launch site." safety.

42) "To strengthen the maintenance Short Term #5: Improve range and check to ground cryogenic safety. fueling equipment."

43) "To strengthen the withdrawal Short Term #5: Improve range and evacuation of the people." safety.

44) "To strengthen measures for Short Term #5: Improve range emergency." safety.

* The Independent Review Committee recommendations are listed in their entirety under the heading "Substance of the Preliminary Report" in the "Overview of Events" earlier in this chapter.

Loral does not believe that the PRC's actions resulted from the Independent Review Committee. Loral stated in an update to its State Department disclosure provided at the request of the Select Committee that "none of the Chinese's [sic] announced improvements to its Long March 3B rockets was the result of Loral's participation in the Independent Review Committee." 235

However, the corrective actions presented by the PRC in April 1997 are much more comprehensive than the list of corrective actions presented a year earlier at the Apstar 1A pre-flight briefing in April 1996.236

At the Apstar 1A briefing, which preceded the Independent Review Committee activities, the PRC listed:

o Six "comprehensive enhancements for [the] inner frame axle circuit" o Several general reliability design review actions to be completed in 1997 o Ten "production assurance" corrective actions237

The 1996 briefing expressly matched only two corrective actions from the 1997 briefing: to increase reliability of the inertial measurement unit's slip rings (1997 corrective action #10 of 44) and to perform a review of the Long March 3B design toward improving the overall reliability (1997 corrective action #21 of 44).238

The Independent Review Committee Helped the PRC Improve the Reliability of Its Long March Rockets

The Defense Technology Security Administration stated in its assessment of the Independent Review Committee activities that "[t]he significant benefits derived by China from these activities are likely to lead to improvements in the overall reliability of their launch vehicles [rockets] . . . and in particular their guidance systems." 239 Likewise, the interagency review team reported in their assessment that the advice given by the Independent Review Committee could improve PRC space rocket reliability.240

By identifying the true Long March 3B failure mode, and additional modifications for the Long March 3B inertial measurement unit, it is likely that the Independent Review Committee helped the PRC avoid future failures of the Long March 3B.

Afterword

U.S. COMPANIES'

MOTIVATIONS

TO LAUNCH SATELLITES

IN THE PRC

Afterword

U.S. COMPANIES'

MOTIVATIONS

TO LAUNCH SATELLITES

IN THE PRC

Competitive International Launch Industry

The international space launch services industry is very competitive. Europe, China, Russia, Ukraine, and Japan are active competitors in this market. The main competitor to U.S. companies for commercial launch services is Europe's Arianespace. The Congressional Research Service reports that "Europe has a 50-60% share of the commercial launch services market, while the United States has 30-40%, and China and Russia share the rest." Ukraine and Japan have not yet launched satellites on a commercial basis, although both have contracts to do so.241

Several factors motivate U.S. companies to launch satellites in the PRC. International consortia with PRC investors can apply pressure for, or force the use of, PRC launch services. The backlog of available rockets elsewhere is a factor, and the comparatively low price is also an inducement.242

Launch Backlog

Rocket Wait (yrs.) # of Satellites Launch Rate

in Backlog per year

Delta II 3.2 42 13

Zenit 3.0 3 1

Atlas 2.9 26 9

Long March 2.7 16 6

Ariane 2.4 41 17

Proton 2.3 21 9

Source: Aerospace Industries Association datasheet titled "China/Satellite Launch Fact Sheet" dated 6/3/98.

PRC Commercial Launch Services

The PRC offers several versions of its Long March rockets for commercial launch services through China Great Wall Industry Corporation. According to the Congressional Research Service, "China reportedly has about 10% of the worldwide market for commercial space launches." 243

The PRC is the locus of an expanding marketplace for satellite-based telecommunications services, including mobile telephone services, direct broadcast television and digital data services. This has spawned numerous enterprises that hope to capitalize on this market and that include PRC investment.

Frequently, these wholly or partly PRC-owned customers for launch services require that their satellites be launched by China Great Wall Industry Corporation. Examples include the Asia Pacific Telecommunications Satellite Company, Mabuhay, and Asiasat. This is the leading reason for U.S. satellite manufacturers to launch their satellites in the PRC.

PRC Launches Are Subsidized

Because of the PRC's non-market economy, the potential for technology transfer, and political concerns, the United States agreed in 1989 to grant export licenses for launches of U.S.-built satellites in China only on several conditions. These conditions included an agreement by the PRC "to price its launch services Ôon a par' with Western companies." 244

That six-year agreement was signed in 1989 and expired in 1994. A new seven-year agreement was signed on March 13, 1995.

According to the Congressional Research Service, the "Bilateral Space Launch Services Trade Agreement" with the PRC specifies:

o Geostationary Earth Orbit satellite (GEO)245 launches must be priced on a par with Western prices o If the price is within 15%, it will normally be considered consistent with this obligation o Prices more than 15% below will be examined in detail o Low Earth Orbit satellite (LEO)246 launches must be priced on a par with Western prices 247

The PRC was accused of violating this agreement in a 1990 contract to launch the Arabsat satellite for $25 million. The main competitor for that launch, Arianespace, turned to the French and U.S. governments to prohibit the export of the satellite, which included U.S.-built components, to the PRC. The Arabsat consortium eventually terminated its contract with the PRC, and launched on an Arianespace rocket.248

According to the U.S. Trade Representative, "Arabsat became the first in a series of PRC bids that have been as low as half those offered by Western bidders." 249

The Intelsat VIIA launch services were won by China Great Wall Industry Corporation "with a bid of $56 million, far below the $100-110 million bid by Arianespace." 250

The price China Great Wall Industry Corporation bid for launching the Loral-built Mabuhay satellite was 22-26% below Western prices.251

Additionally, the PRC bids to launch the Apstar-1, Apstar-2, Asiasat-2, and Echostar satellites were all 22-36% below Western bids.252

In May 1997, the U.S. Trade Representative stated that it believed the PRC had violated the pricing provisions of the bilateral agreement in connection with the launch of the Loral-built Mabuhay satellite. The PRC disagreed with this allegation.253

Chronology of KEY Events

1988

______________________________________________________________________

October 4 Intelsat awards Intelsat VII contract to Loral for up to nine satellites. This fixed-price contract had a total value of nearly $1 billion. Intelsat had released the RFP for this procurement on October 1, 1987.

1992

______________________________________________________________________

April 24 Intelsat awards contract to China Great Wall Industry Corporation (CGWIC) for launch services Ð eventually covering the launch of the Intelsat 708 satellite in February 1996. Intelsat had released an RFQ for this procurement on July 16, 1991.

______________________________________________________________________

May 11 Loral submits export license application to State Department covering export to the PRC of technical data supporting launch.254

______________________________________________________________________

September 18 State Department issues export license No. 533593 for Loral export of technical data supporting a satellite launch (Form DSP-5).255

______________________________________________________________________

September 4 Loral submits export license application to State Department for export of the Intelsat 708 satellite to the PRC.256

1993

______________________________________________________________________

Mid-1993 Intelsat exercises option for Intelsat 708 satellite from Loral. The 708 satellite is identical to the 706 and 707 units. The 706 was the first in the Intelsat VIIA program.

______________________________________________________________________

July 14 State Department issues license No. 544724 for export of Intelsat satellite to the PRC for launch (Form DSP-5).257

1994

______________________________________________________________________

1994 Loral and Intelsat employees take site survey trip to Xichang, PRC to inspect facilities for upcoming Intelsat 708 launch. Facilities described as primitive but workable.

1995

______________________________________________________________________

April 7-8 Loral briefing package is provided to China Aerospace Corporation (CASC) describing Loral and its capabilities, along with a proposed ten-year joint technology development program between Loral and CASC.258

______________________________________________________________________

June 6 Loral requests waiver to transport the Intelsat 708 satellite on a foreign flag aircraft to the PRC.

______________________________________________________________________

June 9 Loral signs Memorandum of Agreement with CASC for a ten-year joint technology development program.259

______________________________________________________________________

November 2 Loral sends letter to CASC "In Furtherance of the Technology Cooperation Agreement," enclosing performance specification documents for a solar panel, a propellant tank and a pressurant tank, and expressing interest in CASC manufacturing such articles for future Loral satellite programs.260

1996

______________________________________________________________________

January 11 Intelsat 708 satellite is shipped to Xichang, PRC, launch site.261

______________________________________________________________________

January 16 Loral Export Control Manager William Schweickert sends e-mail to Loral Export Control Officer Duncan Reynard describing security issues/infractions that Col. Nicholas Alexandrow of the Defense Technology Security Administration (DTSA) discussed with Schweickert that morning. The issues were raised by DTSA monitor Steven Prichard at the Xichang launch site and include unescorted PRC nationals, violations of the Site Security Plan and the Technology Transfer Control Plan (TTCP), and lack of cooperation by Loral staff.262

January 24 Loral received and reviewed the Apstar technical data export license, which prohibited any discussion or release under the license of any technical data concerning rocket failure analysis or investigation.

______________________________________________________________________

February 15 Intelsat 708 launch failure occurs in Xichang at 3 a.m. local time.263 U.S. personnel taken to crash site at 10 a.m.264 Not allowed to visit the debris field until late in the afternoon.

______________________________________________________________________

February 16 Debris recovery operation begins at crash site and includes Loral, Intelsat, Pinkerton, and PLA personnel. 265

______________________________________________________________________

February 17 Loral memorandum from Muhammad Wahdy of Loral and acknowledged by DTSA's Prichard documents debris recovery. This report estimated that 30 percent of the command processors, which contain the encryption electronics, were recovered.

______________________________________________________________________

February 19 Debris is shipped to Palo Alto, California, by Loral personnel.

______________________________________________________________________

February 21 Johnson & Higgins (J & H) Vice President Paul O'Connor sends letter to China Great Wall Industry Corporation (CGWIC) suggesting CGWIC implement an aggressive public relations campaign for underwriters.266

______________________________________________________________________

February 22 J & H Manager in Paris, Jacques Masson, sends letter to O'Connor reporting discussions with French insurance community regarding the impact of Intelsat 708 failure on future insurance programs. Mentions need to create an "independent inquiry board." 267

Loral received and reviewed the Mabuhay technical data export license, which prohibited any discussion or release under the license of any technical data concerning rocket failure analysis or investigation.

______________________________________________________________________

February 26 Insurance underwriters for Apstar-1A program become increasingly disappointed regarding the lack of an independent and international failure review committee.268

Paul O'Connor (J & H) provides CGWIC with a failure review committee schedule modeled after an Ariane failure review plan.269 O'Connor urged CGWIC to allow J & H to obtain failure review conclusions first.270

______________________________________________________________________

February 27 CGWIC issues a press release that identifies the cause of the launch failure to be the inertial platform in the Long March 3B control system.271

______________________________________________________________________

February 28 O'Connor (J & H) outlines for CGWIC minimum requirements for the Apstar-1A reinsurance program to continue.272

______________________________________________________________________

March 4 Intelsat engineer Daniel Lilienstein writes memorandum to Intelsat management documenting unsafe conditions at Xichang launch site during Intelsat 708 launch. 273

______________________________________________________________________

March 9 Hughes personnel Pulcher, Lanzit, Arthur, Yiu, and Dome visit Xichang launch site in connection with upcoming Apstar-1A launch.274

______________________________________________________________________

March 10 Hughes personnel Pulcher, Lanzit and Arthur meet with representatives of CGWIC, China Launch and Tracking Control General Administration (CLTC), China Academy of Launch Vehicle Technology (CALT), Asia Pacific Telecommunications (APT), and several insurance underwriters in Xichang regarding the upcoming Apstar-1A satellite launch.275

______________________________________________________________________

March 14 Apstar-1A insurance meeting is held in Beijing, involving representatives of APT, CGWIC, J & H, Hughes, CLTC, and CALT. J & H official O'Connor presents insurance demands: (1) a final PRC report on the cause of the Long March 3B launch failure, and (2) an independent review of the PRC investigation.276

CGWIC sends letter to Loral President Berry inviting Loral to attend meeting of the PRC Failure Investigation Committee in Beijing on March 20-22, 1996.277

______________________________________________________________________

March 18 Loral letter to CGWIC advises that Loral and Intelsat cannot attend the Failure Investigation Committee meeting on such short notice.278

______________________________________________________________________

March 20 CGWIC sends letter to Loral inviting Loral and Intelsat to the Failure Investigation Committee meeting in Beijing at the end of March or beginning of April.279

J & H Manager Jacques Masson in Paris identifies potential participants in an independent review committee for the Intelsat 708 failure investigation.280

______________________________________________________________________

March 21 Loral letter to CGWIC advises that Loral can only attend the Failure Investigation Committee meeting if invited by Intelsat.281

Insurance underwriter, ACE Ltd., advises J & H that CGWIC's actions regarding the Intelsat 708 failure investigation were unacceptable and the Apstar-1A insurance contract was in jeopardy.282

______________________________________________________________________

March 27 CGWIC letter to Loral invites Loral to Failure Investigation Committee meeting in Beijing from April 10-12 as guests of Intelsat.283

______________________________________________________________________

March 28 CGWIC issues press release listing four possible failure modes: (1) broken wire to inner torque motor, (2) blocking of inner frame axis, (3) open loop of follow-up frame, (4) environmental stress.284

______________________________________________________________________

March 29 Loral letter to CGWIC advises that Loral will attend the Failure Investigation Committee meeting and will send Loral personnel Wah Lim, Nabeeh Totah and Nick Yen.285

______________________________________________________________________

March Intelsat Board of Governors decides to terminate all existing launch service agreements with CGWIC.

______________________________________________________________________

April 3 Letter to U.S. Department of Commerce, Bureau of Export Administration and U.S. Department of State, Office of Defense Trade Controls (ODTC), wherein Duncan Reynard, Loral, requests clarification as to which agency has licensing jurisdiction over matters concerning the Mabuhay and Apstar IIR programs.

Additionally, Loral recommends that ODTC re-issue licenses for these two programs to include the following language: "Questions and comments about Long March launch failures or investigations must be reviewed and approved prior to release in accordance with the procedures in the Technology Transfer Control Plan which was provided with the applicant's license application."

______________________________________________________________________

April 4 CGWIC letter invites Hughes to participate in an Independent Oversight Team.286

______________________________________________________________________

April 5 CGWIC reports to J & H that an Independent Review Committee is being established to meet the insurance community's minimum requirements to insure the upcoming Apstar-1A launch.287

______________________________________________________________________

April 10-12 Intelsat and Loral personnel are observers at the Failure Investigation Committee meeting in Beijing. PRC presents the results of their investigation into the launch failure (three volumes of data, reports, and conclusions). Loral personnel present: Lim, Totah, and Yen. Intelsat personnel present: Terry Edwards.288

______________________________________________________________________

April 11 CGWIC contacts Bansang Lee (Loral's representative in the PRC) to invite Lim to chair an Independent Review Committee (IRC). Lee passes invitation to Lim.289

Government Security Committee (GSC) meeting at Loral in Palo Alto. Loral President Robert Berry reports that he and others have been invited to review the PRC investigation into the Intelsat 708 launch failure. The U.S. review team will not provide advice or direction on how to correct deficiencies, but will advise the PRC that it must be more open and truthful about their launch problems. GSC member Steven Bryen suggests that Loral obtain State Department approval for any responses provided to the PRC by this review team.290

______________________________________________________________________

April 14 The Independent Review Committee (IRC) charter is established to review the work of the PRC's Failure Investigation Committee. A copy of the charter is faxed to Hughes IRC member Robert Steinhauer.291

______________________________________________________________________

April 15-16 Apstar-1A reinsurance meeting is held in Beijing, including representatives of APT, Hughes, CGWIC, and the insurance industry.292 Specific attendance includes: Hughes personnel Steinhauer, John Smay, Pulcher, Lanzit, Wong, Guan, and Lang; Loral personnel Wah Lim and Nick Yen; J & H personnel Swanson, O'Connor, Quinn, Davis, Zhang, Masson, and Chan.

______________________________________________________________________

April 16 Wah Lim briefs the Apstar-1A reinsurance meeting audience on the IRC creation, membership, and charter.293 One of Lim's briefing charts states: "IRC Objectives Ð To ensure the success of future Long March series launches: . . . Recommend to China Aerospace Corporation & CGWIC any other areas of improvement." 294

______________________________________________________________________

April 17 Lim sends a letter to CGWIC inviting the PRC to attend an IRC meeting in Palo Alto, on April 22-23, 1996.295

Lim sends a letter to Steinhauer at Hughes confirming the dates for the IRC meetings in Palo Alto and Beijing.296

______________________________________________________________________

April 19 Loral legal counsel Julie Bannerman, Export Control Officer Duncan Reynard, and Technology Control Manager William Schweickert learn of imminent arrival of PRC visitors.297

______________________________________________________________________

April 22 Reynard first learns that morning about PRC visitors coming (that day) for an IRC meeting. He learns this from Schweickert.

The IRC meeting in Palo Alto begins.298 Short technology export briefing given by Schweickert at the beginning of the first day. The briefing advises the IRC members that they have no export license for the activity, and what actions are permitted.299 The PRC visitors are not present on the first day. IRC members John Holt and Reinhard Hildebrandt are not present on the first day. The IRC members discuss the PRC launch failure investigation as documented in reports previously furnished by the PRC. Also, the IRC members draft numerous questions for the PRC.300

______________________________________________________________________

April 23 The IRC meeting in Palo Alto continues for a second day. The PRC visitors are present. British IRC member Holt is present. The IRC questions regarding the PRC failure analysis are presented.301

German IRC member Hildebrandt and PRC visitors arrive in afternoon.302

Loral's Yen briefs U.S. Government officials, including State Dept. staff: Oldenberg, Bemis, and Chih; Dept. of Transportation: Welles; Dept. of Commerce: Farmer, Chandler; and Dept. of Treasury: Murphy on the Long March 3B failure, the IRC and the intent of the IRC to issue a report.303

______________________________________________________________________

April 24 The IRC meeting in Palo Alto adds a third day to accommodate the PRC visitors' delayed arrival. Hughes IRC members John Smay and Robert Steinhauer are not present.304

______________________________________________________________________

April 25 Steinhauer meets with Professor Huang in Torrance, California, to learn what happened at IRC meeting on April 24. Also discussed PRC manufacturing processes for the inertial measurement unit (IMU) on the Long March 3B.305

Yen faxes minutes of the first IRC meeting to CGWIC.306

______________________________________________________________________

April 30Ð The second IRC meeting is held in Beijing. Ten to 20 PRC

May 1 nationals are present to answer questions from the IRC. U.S. participants are Loral's Lim, Totah, and Yen, Smay from Hughes, and Frederick Ormsby.307

______________________________________________________________________

April 30 The IRC meets in Beijing. Meeting covers introductions, overview, and answers to the IRC questions from the first meeting in Palo Alto.308 That evening the IRC members caucus at their hotel to discuss issues and plan for the next day.309 They decide during the caucus to ask for a splinter meeting.

______________________________________________________________________

May 1 The IRC meeting in Beijing continues. Splinter meeting held on subject of control systems and the inertial platform. Splinter meeting attended by Fred Chan, Jack Rodden, Holt, and Yen. The IRC members are given tours of several facilities: IMU assembly and IMU test facilities.310 That evening they dine as guests of the PRC.311

______________________________________________________________________

May 2 Rodden, Chan, and Smay go sightseeing with Madame Zhou, the PRC representative for the Asia Pacific Telecommunications Company.312

______________________________________________________________________

May 2-5 British IRC member Holt sends draft he wrote by e-mail to Hughes IRC member Smay on May 2. On May 4, Smay sends e-mail to Holt providing comments on the draft Ð that e-mail message is also faxed to Lim at Loral.313 On May 5, Holt sends e-mail to Smay thanking him for his comments.314

______________________________________________________________________

May 3 Totah sends memorandum to Lim including comments, conclusions and short-term and long-term recommendations concerning the failure.315

Totah sends handwritten memorandum to Lim advising that he has made comments on Holt's draft, and that the draft was incomplete.316

Holt sends fax to Lim, including four pages of draft material on the cause of the failure.317

Smay writes 20 pages of draft material for the IRC Preliminary Report, including an outline and brief paragraphs for a few sections. Smay assigns a section titled "Recommended Design Fixes" to Steinhauer for drafting.318

______________________________________________________________________

May 4 Ormsby sends letter to Lim with comments on IRC meetings in Beijing, and includes three recommendations for PRC investigation and analysis.319

Smay sends e-mail to Holt with comments on Holt's draft. This e-mail was also faxed to Lim.320

______________________________________________________________________

May 5 German IRC member Hildebrandt sends fax to Lim with his contributions to the "Preliminary Assessment Report," including stating the need for "an intensive quality inspection" in the PRC IMU integration process and describing Western methodologies for reducing wiring connection problems. Lim's secretary faxes a copy to Yen.321

______________________________________________________________________

May 6 Holt sends five-page fax to Lim with comments and contributions to the IRC report.322

Smay sends the section of the IRC Report that he compiled to Yen.323

Yen faxes the minutes from the IRC meetings in Beijing to CGWIC.324

______________________________________________________________________

May 7 Yen faxes a draft of the Preliminary IRC Report to CGWIC and to the IRC members.325 Lim directed Yen to do this.326

Lim sends a letter to CGWIC, including minutes of IRC meetings on April 30 and May 1, along with action items and preliminary assessments that were made during and after those meetings. Lim indicates that the IRC will provide a formal report to CGWIC by May 10, 1996.

______________________________________________________________________

May 8 Holt sends a fax to Yen with comments and contributions to the IRC report, and thanking Yen for the draft of the Preliminary Report.327

Steinhauer sends a one-page fax to Yen with comments and contributions to the IRC report, mentioning "de-emphasis of safety issues." Steinhauer states: "In general, I agree with report and its findings." 328

______________________________________________________________________

May 9 Holt sends a one-page "urgent" fax to Yen with Holt's final thoughts on the IRC review. Holt does not concur with CALT's theory about an intermittent wire break because there is no evidence of reconnection.329

Hildebrandt sends a one-page fax to Yen stating that he has just received the fax of the draft IRC Preliminary Report. Hildebrandt offers a minor proofreading comment and states that he agrees with the draft.330

Steinhauer sends an e-mail to other Hughes employees saying that the IRC Preliminary Report is going to Beijing that night.331

______________________________________________________________________

May 10 Lim provides a copy of the draft Preliminary Report to Loral General Counsel Bannerman for her review, and he assumes that the draft was okay since he receives no comments from her.332

Yen faxes a cover letter and final version of IRC Preliminary Report, less attachments, to CGWIC. Yen also ships complete copies to all IRC members via express mail.333

Loral General Counsel Bannerman attempts to halt distribution of the IRC report after Yen faxes the report to the PRC.334

Lim sends a letter to IRC members advising of Yen's completion of the "formal IRC Preliminary Report" and that a copy has been sent to them. Lim states that the report is currently being reviewed by the Loral General Counsel's office and asks the IRC members not to discuss the report with non-IRC members.335

______________________________________________________________________

May 13 Yen faxes the final IRC Preliminary Report to a hotel in Beijing, for O'Connor of the Johnson & Higgins insurance brokerage firm.336

Yen also sends a copy of the Preliminary Report to O'Connor's office in Washington, D.C.337

Reynard first learns that the report has been sent to IRC members and possibly to J & H.338

Lim sends letter to He Xing of CGWIC advising that the IRC has completed the formal Preliminary Report and the report is currently under review by Loral legal counsel. Says he is sending a copy of the report to O'Connor.339

Lim sends letter to O'Connor advising that the report will not be furnished to CGWIC until an "export license or an equivalent authorization is obtained." 340

______________________________________________________________________

May 14 Reynard sends memorandum to Berry criticizing the IRC draft report as poorly organized, poorly written, and filled with inaccurate statements and illogical conclusions. Says that the Loral employees involved in this IRC work have already committed serious violations of the International Traffic in Arms Regulations (ITAR) and and the Missile Technology Control Regime (MTCR).341

Bob Kovac of DTSA reads article in Space News about Loral IRC investigation and calls Loral's Harold Bradshaw, who subsequently sets up a meeting the next day.

______________________________________________________________________

May 15 Yen sends fax to IRC members announcing that the IRC Preliminary Report has been submitted to the U.S. Government for review. During that review, the IRC members are not to disclose or discuss the content of this report with anyone, especially the PRC. The letter also asks that Holt and Hildebrandt (the non-U.S. IRC members) return all correspondence previously received from the IRC Secretary. Distribution: Lim, Ormsby, Steinhauer, Holt, Totah, Kachigan, Smay, Hildebrandt, Chan, and Rodden.342

Yen writes trip report to Keer for his April 23, 1996 meeting at the U.S. Trade Representative offices in Washington, D.C.343

Reynard notifies DTSA (Kovac) and State Department's Office of Defense Trade Controls (Kenneth Peoples) in person and in writing about the IRC and its report. He tells them that an executive summary section of the draft IRC report has been mistakenly sent to CGWIC. Bradshaw (from Loral's Washington, D.C. office) is also present.

Reynard denies that the IRC report has been sent to the PRC. Kovac tells Reynard that Loral may have violated the law, that they must halt all IRC activity, and that they should submit a voluntary disclosure to State Department. Reynard furnishes a copy of the report to Kovac.

Reynard meets with Peoples. Loral's presentation to Peoples is very general. Reynard may have told Peoples that some part of the IRC report was sent to the PRC Ð Peoples' recollection is unclear.

Reynard sends handwritten fax to Berry summarizing advice from State and DTSA. Includes the words: "Question: did anything go to CASC or CGWIC? Ð we need an honest answer to this." 344

Bannerman sends memorandum to Loral Counsel Zahler reporting Reynard's meetings with U.S. government.345

______________________________________________________________________

May 16 Steinhauer sends fax to Lim confirming plans to attend IRC meeting in Beijing on June 4-5. The fax further says Steinhauer is in agreement with the preliminary report dated May 10 and "Don't really believe that there is a lot of technology transfer present . . . Hope that your filter at SS/Loral understands situation." 346

______________________________________________________________________

May 17 Bradshaw sends fax to Reynard with copies of export licenses #544724 and #533593, commenting that DOD is upset and Loral seems to fail to take provisos seriously.347

Reynard receives from Bannerman several boxes of documents that have been collected from Loral personnel re the IRC activity. Reynard decides to generate an index of these documents over the weekend with the aid of his son.

______________________________________________________________________

May 20 Reynard advises Bannerman of his catalogue of the documents. Bannerman tells Reynard to stop that activity. She intends to have outside counsel perform that job. Reynard stores the documents and later turns them over to Poliner of Feith & Zell.

Lim and Yen admit to Reynard that they sent the IRC report to the PRC on May 10.

______________________________________________________________________

May 21 Reynard sends letter to William Lowell at the State Department, which briefly describes the circumstances of the IRC and its meetings with the PRC, and Reynard's recent meetings with State Department and DTSA. It says each agency received a copy of the IRC report and that Loral subsequently discovered that the executive summary of the report was mistakenly faxed to CGWIC. Loral is investigating the matter.348

______________________________________________________________________

May 23 Loral outside counsel, Feith & Zell, commences investigation of the IRC matter.349

______________________________________________________________________

May 27 Yen sends letter to all IRC members advising of Loral correspondence with State Department, and that all future IRC activities are on hold.350

______________________________________________________________________

May 29 State Department's William Lowell faxes a letter to Higgins, Corporate General Counsel, Hughes Electronics, to notify Hughes that the State Department has reason to believe that Hughes may have participated in serious violations of the ITAR by providing unauthorized defense services to the PRC in relation to the February 1996 launch failure of a Long March rocket. Lowell recommends Hughes take immediate steps: cease all related activity that may require approval, provide a full disclosure and enumerate all releases that would be controlled under ITAR.351

Lowell also sends a letter to Zahler, VP, Secretary and General Counsel, Loral, advising that there is reason to believe that Loral may have participated in serious violations of ITAR. Lowell recommends Loral take immediate steps: cease all related activity that may require approval, provide a full disclosure and enumerate all releases that would be controlled under ITAR.352

______________________________________________________________________

May 29-31 Feith & Zell attorneys visit Loral offices in Palo Alto to interview Loral personnel.353

______________________________________________________________________

May 30 Loral representative in Washington, D.C., Bradshaw and Loral outside counsel Feith meet with Lowell at State.354

______________________________________________________________________

May 31 Loral Counsel Zahler sends a letter to Lowell at State Department advising of Loral investigation, retention of outside counsel and stating that Loral personnel will be interviewed.355

______________________________________________________________________

June 3 Reynard sends a memorandum to Lim instructing him and Yen to retrieve all copies of anything sent out to the IRC Members. Also to ask the IRC Members to certify that no derivative copies were made or distributed.356

______________________________________________________________________

June 4-6 Feith & Zell attorneys conduct follow-up interviews in Palo Alto.357

______________________________________________________________________

June 4 Kuelbs from Hughes General Counsel's office sends a letter to Lowell responding to his letter dated May 29. Hughes reports that they are beginning an internal investigation of the matter.358

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June 6 Lim sends letter to O'Connor asking him to retrieve all IRC-generated documents that the IRC transmitted to him by fax, express mail, or by distribution at any meetings, and to confirm that no derivative copies were made.359

Lim sends a letter to all IRC Members asking them to return all IRC-generated documents and to confirm that no derivative copies were made.360

Lim sends a letter to Zhixiong, CGWIC, asking that they return IRC documents and confirm no derivative copies were made.361

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June 12 Smay and Steinhauer send a letter to Lim advising they cannot comply with request to return the IRC documents, per Hughes Counsel's instructions.362

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June 17 Loral submits a Voluntary Disclosure to State Department through outside counsel, Feith & Zell, regarding suspected ITAR violations surrounding the activities of the IRC.363

CIA submits report to State Department on Independent Review Committee Preliminary Report in response to State Department request. No proliferation concerns.

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June 27 Hughes documents its internal investigation into activities related to the IRC: "Report of Investigation of Alleged Violations of International Traffic in Arms Regulations (ITAR)" for hand delivery to Lowell (State Department).364

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July 18 CGWIC sends a letter to IRC members advising closure of IRC due to U.S. Government ban.365

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August Department of Defense issues assessment of Independent Review Committee activity. Moderate harm to national security.

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September 26 Hughes furnishes the State Department a list of nearly 150 names referenced in the June 27, 1996 Hughes report on the IRC and its exhibits. This was in response to a request from the State Department dated September 23, 1998.366

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October 21-22 PRC presents a report on the Long March 3B Failure Investigation by CGWIC at a Mabuhay program meeting at Loral in Palo Alto. DTSA monitor, Major Smith, was invited to that meeting.367

1997

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March 19 Central Intelligence Agency issues assessment of IRC matter that conflicts with the Defense Department assessment.

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March 25 The State Department issues assessment based on Defense Department and CIA analyses. Significant improvement to the Long March 3 guidance system. State also reviewed the CIA's assessment and disagreed with it.

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May 16 DOD/DTSA assessment on the IRC matter is issued. DTSA finds that the IRC performed an unauthorized defense service that are likely to lead to improvements in reliability of rockets and missiles. Recommended referral to the Justice Department for criminal prosecution.368

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August 19 Agila 2 satellite, formerly named Mabuhay, is successfully launched from Xichang, PRC, on a Long March 3B. Loral manufactured the satellite.369

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October 16 Apstar-2R satellite is successfully launched from Xichang, PRC. Loral manufactured the satellite.370

1998

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February 18 President Clinton approves a waiver for the Loral-built Chinasat 8 satellite to be exported to the PRC for launch.

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May 7 Hughes documents background information regarding the IRC activities. This report is furnished to the Space Subcommittee of the House Science Committee on May 8, 1998.371

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June 15 Congressional staffs from the House National Security Committee, International Relations Committee, and Science Committee are briefed on the export control process by officials from the State Department. David Tarbell, Director of DTSA, testifies that a rocket failure analysis was a defense service and therefore subject to license.372

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October Hughes reports on its Internet web site that "Hughes employees drafted no portion of the report that was prepared by the committee . . ." and the "Hughes employees did not write any portion of this [IRC] report."

Technical Afterword

Technical Aspects of Technology Transfer During the Loral Failure Investigation

Technical Afterword

Technical aspects of Technology Transfer during the Loral Failure Investigation

Background

The February 14, 1996 failure of the PRC Long March 3B during the launching of the Intelsat 708 communications satellite, built by Loral, set in motion a number of accident investigation and reporting activities. These brought PRC engineers and designers face-to-face with Western engineers and technical experts in satellite and related rocket technologies.

The initial technical analyses of the accident were conducted by two groups of PRC scientists and engineers. These analyses were presented in several sessions in March, April, and May 1996 to representatives of the satellite launch insurers, re-insurers, Intelsat and Loral.

Initially, greater priority seems to have been placed on briefings and discussions with representatives of Hughes and the PRC-controlled Asia Pacific Telecommunications Co., Ltd., and their respective insurers and re-insurers. This was because Hughes was the builder and Asia Pacific Telecommunications was the owner of the Apstar 1A satellite, which was the next satellite scheduled to be launched (on April 1) on a Long March rocket (albeit the Long March 3, a different version from the 3B). Before that scheduled next launch could take place, these organizations would need to be convinced that the Apstar 1A would not be exposed to the same defects or hazards as those in the Long March 3B rocket that had caused the failure of the Intelsat 708 launch.

Loral, too, was highly motivated to remedy the defects in the Long March 3B because its upcoming Mabuhay satellite launch was the next scheduled aboard the Long March 3B.

On March 9, 1996, Hughes representatives toured the launch site facilities, which had suffered some damage as a result of the Intelsat 708 accident, and subsequently held discussions concerning the findings of the PRC accident investigations.

On March 14, 1996, a meeting was held with the insurance underwriters for the Apstar 1A in Beijing. Hughes and Asia Pacific Telecommunications representatives were also in attendance. The main information the PRC rocket authorities and the APT representatives sought to convey to the insurance underwriters was that the accident investigation of the Intelsat 708 launch failure had shown that the Long March accident was caused by the failure of the inertial measurement unit. This is the subsystem that provides attitude, velocity, and position measurements for guidance and control of the rocket.

The PRC representatives stated that the inertial measurement unit used on the Long March 3B that failed was different from the one used on the Long March 3, which was the rocket that would be used to launch the Apstar 1A, and that therefore there should be no cause for concern for the launch of the Apstar 1A.

Representatives of the insurance underwriters then stated that insurance of the Apstar 1A launch would be conditioned on delivery of a final report on the root causes of the Long March 3B failure, and a review of that report by an independent oversight team.

A subsequent meeting with the insurers and re-insurers was scheduled to take place in Beijing around mid-April, at which time the PRC representatives were to present in detail the results of their accident investigation of the Long March 3B.

The Apstar 1A re-insurers meeting took place on April 15 and 16. It included both items normally addressed in preflight reviews as related to the upcoming Apstar 1A launch, and the issues arising from the Long March 3B rocket failure in the Intelsat 708 launch.

The latter issues were largely covered in presentations by Huang Zuoyi, President of Great Wall Aerospace, a California-based subsidiary of China Great Wall Industry Corporation. These presentations substantially made the same points as were made at the March 14 meeting: the Long March 3B failure was in the inertial measurement unit, and this was not cause for concern for the Apstar 1A launch since it would be launched by a Long March 3 rocket having a different (and older) inertial measurement unit with a previous record of successful launches.

At this same meeting, in response to the re-insurers' earlier-stated requirement, China Great Wall Industry Corporation announced the creation of an Independent Review Committee to review the findings and recommendations of the PRC committees investigating the Long March 3B failure.

Dr. Wah Lim of Loral was to be the Independent Review Committee Chairman, and Nick Yen, also of Loral, was to be the Secretary. Both were present at the meeting and discussed the role of the Independent Review Committee, and the roster of members of the committee. The two prospective members from Hughes, Dr. John Smay and Robert Steinhauer, were also present, as was Nabeeh Totah, a senior technical staff member at Loral, who would serve as one of four technical experts provided by Loral to support the Independent Review Committee.

During this meeting, the participants were taken on a tour of the Long March rocket assembly area and were shown, in partially-opened state, units described by the PRC as the older Long March 3 inertial measurement unit and the newer Long March 3B inertial measurement unit. Thus, almost half of the Independent Review Committee participants (members plus supporting experts) had prior exposure to the findings and views of the PRC representatives derived from their accident investigations, and they had opportunities to raise questions and issues with the PRC representatives well before the first meeting of the Independent Review Committee.

The Long March Series of Rockets

The PRC Long March rocket evolved from the PLA's long-range ballistic missiles, much as most of the U.S. heavy-lift rockets were derived from earlier ballistic missiles: the Atlas E and F; the Titan II; and the Thor (the forerunner of the Delta rocket).

Much of the civil and commercial satellite traffic needs to be put into geosynchronous orbit over the equator at 22,000 miles above the Earth's surface. At this altitude, the satellite orbital speed is exactly that needed to keep a constant position over a point on the surface of the rotating earth below. A common method of achieving these orbits is for the rocket to first place the satellite into a highly elliptical geosynchronous transfer orbit, and then for the satellite itself to circularize the orbit at geosynchronous altitude, using a so-called kick rocket motor on board the satellite.

The need to achieve geosynchronous transfer orbit with increasingly heavy payloads has led rocket designers to add high-energy liquid oxygen/liquid hydrogen upper stages on top of the original lower stages that still use the fuels and oxidizers of their ballistic missile antecedents. In addition, increased thrust levels have been added to these first stages by means of strap-on booster rocket motors. The Long March series of rockets has gone through just this set of evolutionary steps, paralleling in this respect its American counterparts.

Guidance Systems for Ballistic Missiles and Rockets

The requirements for guidance accuracy for intercontinental ballistic missiles depend on a nation's strategic objectives and policies, but they are generally more demanding than the accuracy that is required to place a satellite into geosynchronous transfer orbit. For example, for a ballistic missile with a target range of 5,500 miles, an error of one foot per second in the velocity at last-stage burnout (23,000 feet per second) would lead to an error in target impact of about one mile. A satellite on orbit, on the other hand - if such accuracy in its orbital parameters is required - can measure its position over an extended period of time with the aid of ground tracking, and adjust for orbital velocity differences of this magnitude with on-board thrusters using only a few pounds of fuel.

It appears that in the PRC, guidance systems for rockets were initially based on instruments and inertial platform technologies taken over from the predecessor ballistic missile programs. But the PRC's development of inertial guidance for rockets has, as in the West, developed over time in directions somewhat different than inertial guidance for intercontinental ballistic missiles.

Over time, inertial guidance systems for rockets have incorporated simpler, cheaper, lighter, and more reliable components, as well as concepts such as ring-laser gyros and strapdown technology in which there is no inertial platform required to maintain a fixed position in space. In contrast, the latest U.S. ICBM inertial guidance system is the Advanced Inertial Reference Sphere (AIRS), used on the Peacekeeper missile. It is probably the most accurate inertial measurement unit ever developed and manufactured. The inertial measurement units used on earlier ballistic missiles used an inertial platform mounted on a set of gimbaled axis frames. The AIRS, on the other hand, consists of a beryllium sphere floating in a fluorocarbon fluid within an outer shell, with no gimbals or bearings at all, housing highly accurate gyros and accelerometers. The AIRS is complex, difficult to manufacture, and very expensive.

The PRC representatives had indicated (or allowed the impression to be conveyed) to their Western customers and their insurers that the inertial measurement unit used on the several versions of the Long March 2 and 3, up to the 3B, was essentially identical to the inertial measurement unit used on their long-range ballistic missile. Rather than basing their claims of the inertial measurement unit's reliability on the more slender record of space launches alone at the time the Long March was first offered to foreign customers for launch services, the PRC may have offered this information to enhance the record of reliability of the inertial measurement unit. This permitted the PRC to show that the Long March had a longer and larger record of successful flights than would be assumed on the basis of its use in space launches only.

As presented by the PRC participants, the older inertial measurement unit used in the Long March 3 weighed 140 kilograms, and measured 500 x 600 x 800 mm. It had three gimbal axes and three single-axis gyroscopes on its inertial platform. It was also said to have a high degree of redundancy to preclude single point failures. The newer Long March 3B inertial measurement unit was presented as having a weight of 48 kilograms, and dimensions of 300 x 300 x 400 mm. It had four gimbal axes with only two (two-axis) gyroscopes on its inertial platform.

The fourth gimbal axis in the newer Long March 3B unit is associated with the addition of a follow-up frame to the platform mechanism. The follow-up frame precludes the occurrence of gimbal lock. This can take place in inertial platform assemblies when the rocket undergoes large angles of inclination, and two of the frames of a three-gimbal inertial platform mechanism move into the same plane.

Thus, the Long March 3B inertial measurement unit, as described and displayed by the PRC participants, is an essentially different subsystem from the inertial measurement unit of the Long March 3. In fact, it was reported that some members of the insurance community felt that the PRC had an obligation to inform them of this change affecting the reliability and performance of the Long March series of rockets, and should have done so before the Intelsat 708 launch.

The Meetings of the Independent Review Committee

The first meeting of the Independent Review Committee was held in Palo Alto, California, on April 21 and 22, 1996. Some members of the committee and its supporting experts had already had considerable prior exposure to the facts of the accident that occurred during the flight of the Long March 3B rocket carrying the Intelsat 708 satellite.

According to its charter, the Independent Review Committee was nominally an entity responsive to the China Aerospace Corporation, the parent company of China Great Wall Industry Corporation. The President of China Aerospace Corporation convened the Independent Review Committee. It was he who appointed the Independent Review Committee's Chairman, Dr. Wah Lim of Loral.

During the first day of the first Independent Review Committee meeting, those committee members present were briefed by a Loral export control officer concerning export control limitations that would apply to Independent Review Committee activities. In the recollection of several of those present, there were few questions and little discussion of the briefing - a surprising situation, in view of the seeming dissonance between the Independent Review Committee charge in its charter and the restrictions expressed in the export control briefing.

In that briefing, members of the Independent Review Committee were told that disclosure of information that would enhance rocket or missile capabilities of the PRC would not be permissible. But as one participant in the Independent Review Committee activity said, "You can't help but get a little bit too detailed in the interest of finding out what the cause of the failure is. It's possible there could have been [circumstances] where you ask leading questions which you're not supposed to."

The first meeting was devoted to familiarizing the members of the Independent Review Committee, especially those who had not taken part in the earlier April 15 and 16 meeting, with the circumstances of the Long March 3B failure, the data acquired from telemetry, and the findings of the PRC accident investigation up to that time. The Independent Review Committee asked many questions having to do with understanding and interpreting the following:

o Telemetry data o The particulars of the inertial measurement unit hardware o The details of the Long March 3B pre-launch procedures and launch operations o The vibration and acoustic environment to which the inertial measurement unit was exposed in flight and in ground testing o The scope and technical details of the analyses pursued in the PRC accident investigation

Many of the Independent Review Committee's questions could not be answered immediately, and were listed for consideration at the second meeting of the committee that was to be held in Beijing on April 30 and May 1, 1996.

The PRC presentations at the Independent Review Committee meeting on April 21 and 22 repeated the main accident investigation finding reported in the meeting of April 15 and 16: that the cause of the failure was in the inertial measurement unit. Further, the failure in the inertial measurement unit was ascribed by the PRC participants to the loss of current to the torque motor of the inner frame gimbal axis. This loss of current, in turn, was hypothesized to be due to a break in the wire (or soldered joint) that supplied power to the torque motor.

In support of this hypothesis, the PRC participants presented "hardware in the loop" simulation results. The simulation showed agreement with telemetered inertial platform data from the failed flight for about the first six seconds after liftoff. On this basis, the Independent Review Committee granted in its statements and reports to the PRC that the loss of current to the inner frame gimbal torque motor was the most probable cause of the failure.

However, the telemetered flight data indicated three cycles of reversals of platform motion over the approximately twenty-two seconds of flight from liftoff to impact. These data were not matched by the simulations. To explain this cyclic motion, the PRC representatives assumed that the break in the circuit to the inner frame axis torque motor was such that electrical contact could be successively made and broken three times during the flight.

From the first time this explanation was offered, the members of the Independent Review Committee were skeptical of it, and repeatedly questioned it. The PRC participants, on the other hand, never abandoned it from the beginning to the end of the Independent Review Committee activity.

The Independent Review Committee's refusal to accept the adequacy of the PRC participants' explanations, analyses, and simulations to determine the root cause of the failure, and the committee's insistence on the need to simulate the periodic platform motions for the entire 22 seconds of flight, are the main issues raised in the minutes of its first meeting. These topics remained as prominent issues in the committee's preliminary report.

Because the U.S. Government directed cessation of its activities earlier than planned, the preliminary report was the last report issued by the Independent Review Committee.

The other significant issues that were given serious attention by the Independent Review Committee at its first meeting, as reflected in the minutes of the meeting, included the list of questions that the PRC participants were to answer at the following meeting to be held in Beijing. These questions concerned the following areas:

o Quality assurance and control, including acceptance testing procedures for the inertial measurement unit o The design and manufacture of inertial measurement units, and their assembly into the rockets o The validity of the test environments (vibration, noise, and thermal) in the Long March 3B vehicle equipment bay where the inertial measurement unit was located o Range safety at the launch site

The second meeting of the Independent Review Committee took place in Beijing on April 30 and May 1, 1996. On the major issue of the cause of the Long March 3B failure during in the launch of the Intelsat 708 satellite, the PRC participants' conclusions remained unchanged.

The most probable root cause of the accident, the PRC asserted, was a break in the circuit carrying current to the torque motor of the inner frame gimbal. This break they attributed to a failure in the wire directly connected to the torque motor, or one of its soldered joints.

To explain the three cycles of platform motion observed in telemetry, the PRC still advanced the hypothesis that the motion of the wire and the platform caused electrical contact to be made and broken three times. In the failure-tree analysis presented by the PRC participants to examine all possible causes of the Long March 3B launch failure, all failure possibilities not involving the torque motor of the inner frame gimbal axis were ruled out.

The PRC participants also presented a list of proposed fixes to the Long March 3B inertial measurement unit. This list included:

o Improvements in soldering o The cutting of wires to allow length sufficient to allow for the maximum platform frame travel to be encountered o Non-destructive pull tests of soldered joints o X-ray inspection of wires o Improved acceptance testing, and addition of acoustic environment o Redundancy in design o Greater attention to quality supervision of suppliers o Most of these items follow from the erroneously postulated broken-wire failure mode.

However, the PRC's proposed improvements in acceptance testing, with the addition of an acoustic environment, are of more general application - they could apply no matter where in the inertial measurement unit the failure might have occurred. Most of these corrective measures relate to some extent to questions raised by the Independent Review Committee at its first meeting.

Technical Information and Advice Transferred in Independent Review Committee Meetings and Reports

It is not possible to consider all of the technical information and advice that may have been imparted to the PRC representatives during the period of Independent Review Committee activity, since verbatim records of the meetings were not kept at either of the main meetings or at any of the meetings of subgroups (including "splinter groups" involving Independent Review Committee members, staff, and PRC personnel, and meetings involving only Independent Review Committee members and staff) that were held. Therefore, this assessment is based on the Select Committee's review of available records of the Independent Review Committee meetings, its communications with Independent Review Committee members mainly relating to composing and reviewing reports, and its interviews with individual participants in the Independent Review Committee's activities more than two years after that committee had ceased its activities.

Moreover, the perspective adopted in this assessment is that of viewing all of the information as a whole, in the context of the Long March 3B failure and PRC actions not only to find and correct the failure, but also to convince customers, insurers, and re-insurers that the causes of the failure had, in fact, been found and corrected.

From a technology transfer standpoint, it is noteworthy that the Independent Review Committee charter called on the committee not only " . . . to perform an independent assessment of the most probable cause or causes of failure," but also to ". . . review the corrective action plans proposed by the [PRC's Failure Investigation Committee] and make its assessments and recommendations to [China Aerospace Corporation] and [China Great Wall Industry Corporation]." [Emphasis added]

Clearly, the charge to the Independent Review Committee went beyond making judgments about whether or not the PRC had convincingly determined the cause of failure. The Independent Review Committee members were not only to go beyond reviewing the PRC failure analysis to making an independent assessment of the most probable cause or causes of failure, they were also to review and make assessments and recommendations concerning the corrective measures to remove the causes of failure.

Taken literally, corrective measures could be none other than the means of improving the design, manufacturing, or operation of the PRC Long March 3B rocket. By extension, these improvements could improve the design, manufacture, or operation of other PRC rockets as well, and, less directly, of present or future PRC military equipment.

Moreover, the charter called for the Independent Review Committee to " . . . provide the [China Great Wall Industry Corporation] with copies of any and all working papers collected during its review process."

It is important to recognize that one of the benefits of a comprehensive accident investigation is that many potentially faulty design features, parts, or procedures ("accidents waiting to happen") may be found and corrected, whether or not they can actually be shown to have played any part in the accident under investigation.

A recent example is that in the investigation of the flight failure of TWA 800, deficiencies were found in the electrical systems of the fuel tank pumps that might have caused or contributed to the failure, or might be the cause of a failure in the future. These deficiencies are being corrected in spite of the fact that they have not been proved to be the cause of the accident.

Thus, included in this assessment are information and advice to the PRC on correcting faults or deficiencies in the design, manufacture, or operation of the Long March 3B, and on improving PRC quality assurance and reliability - as well as information and advice that could apply to PRC rockets or ballistic missiles with design features similar to the Long March 3B - whether or not they are related to what was ultimately determined to be the most likely cause of the Long March 3B accident.

In the period after the Independent Review Committee activities were terminated, the PRC participants, continuing their "hardware in the loop" simulations, found that even with artificially-imposed making and breaking of contact of the electrical connection to the inner frame gimbal torque motor, they could not simulate the periodic behavior of the inertial platform for the entire 22-second flight duration.

As later reported by the PRC participants, the series of "hardware in the loop" simulations and analyses that took place from May 20 to June 20, 1996 led to the identification and verification of the follow-up frame gimbal axis torque motor circuit as the site of the failure. They did find that by breaking the circuit to the follow-up frame torque motor, the entire 22 seconds of flight including the cyclic motions of the inertial platform could be simulated.

The conclusion was then reached that the root cause of the failure was to be found in the electrical circuits associated with the follow-up frame gimbal torque motor.

According to PRC officials, examination of these circuits in inertial measurement units from the same production batch as that aboard the failed flight of the Long March 3B led to the discovery of a faulty gold-aluminum junction in the power module that drove this torque motor. The deterioration of the gold-aluminum joint was cited as the cause of the break in the circuit of the follow-up frame gimbal torque motor that led to the inertial measurement unit failure. These findings and conclusions were briefed to the satellite manufacturing, operating, and insurance communities in October 1996.

In the last Independent Review Committee report sent to the PRC after the committee's second meeting, it was suggested that the making and breaking of electrical contacts was not necessary to explain the cyclic motion of the rocket's inertial platform. Rather, once a circuit failure had occurred, it was possible for the platform to perform a natural limit cycle motion. Limit cycles are a well-recognized phenomenon in the dynamics of mechanical, electrical, and electromechanical nonlinear systems. Although this argument was introduced while the break in the circuit to the inner frame torque motor was considered to be the most probable root cause for the observed inertial platform behavior, it obviously could apply to any other frame or torque motor.

During the second Independent Review Committee meeting, attention was called to the flat behavior of the angle measurement (resolver) of the follow-up frame. The Independent Review Committee stated that it was "very critical" to explain this behavior.

The PRC participants stated that the flat behavior was due to a bad choice of resolution for this telemetry channel - an explanation they obviously changed their mind about later.

Also in the same meeting, the Independent Review Committee called further attention to the follow-up frame by suggesting the possibility that it might have been frozen - that is, mechanically jammed. Although it did not turn out to be the final explanation, this failure mode could have produced about the same kind of inner frame angle resolver telemetry trace as a break in the circuit powering the follow-up frame gimbal axis torque motor. This was an alternate possible cause for the anomaly in the telemetry trace of follow-up frame angle.

Moreover, in their last report, the Independent Review Committee once more suggested that the PRC look again at the validity of their explanation of the flat trace of the follow-up frame angle resolver.

In its comments, questions, and advice on the inertial measurement unit failure mode, and on the simulations and analyses conducted to establish that mode, the Independent Review Committee:

o Consistently rejected the making and breaking of electrical contact by the wire delivering current to the torque motor for the inner frame as a plausible explanation for the observed cyclic motion of the inertial platform o Insisted that, although the wire break in the circuit carrying current to the inner frame torque motor might be considered the most probable root cause for the failure, it could not be accepted as conclusive until additional analyses and "hardware in the loop" simulations could demonstrate that the cyclic motions of the inertial platform over the entire 22 seconds of flight could be accounted for on the basis of this cause o Forcibly called attention to the indications in telemetry that the follow-up frame angle measurement was flat, and remained skeptical of the PRC explanations for this anomaly o Pointed out that successive making and breaking of electrical contact in a torque motor circuit was not a necessary condition for development of cyclic motion of the platform

It is, of course, not possible to say how much these technical comments, suggestions, and challenges influenced the PRC. But they were all in the direction of moving the PRC representatives away from their fixation on the broken wire in the inner frame gimbal axis torque motor as the predominant, if not sole, failure mode to which they had given significant attention in their investigation since mid-March.

Another area that the Independent Review Committee focused on was reliability and quality assurance. In their plant tours, several of the Independent Review Committee members saw what they considered to be flight inertial measurement unit hardware being carelessly handled and touched. In the preliminary report, in the short term, the Independent Review Committee recommended that higher quality control and quality standards be applied in the manufacturing process.

In the detail design of the inertial platform wiring, the Independent Review Committee recommended studies to either preclude wiring harness motion during gimbal motion, or alleviate the effect of unavoidable deflection on solder joint integrity.

Also, the Independent Review Committee recommended that the PRC reexamine the environmental conditions (vibration, noise, and thermal) used in qualification and acceptance testing of the inertial measurement unit.

The distinction between qualification tests and acceptance tests must be made:

o Qualification tests are a part of the design and development of the inertial measurement unit. Their purpose is to verify the basic design and manufacturing processes. A high degree of fidelity in simulating flight environments is sought in qualification testing. o Acceptance tests are carried out on each unit produced. Acceptance test environments are generally at lower levels of intensity than qualification tests. Depending upon the particulars of specific designs and their potential vulnerabilities, they may be of lower fidelity in representing flight environments in detail.

In fact, vibration tests as part of acceptance testing may often be regarded as tests of workmanship in production. The Independent Review Committee referred specifically to the workmanship verification function in Attachment IV to the minutes of its second meeting as follows: "Quality control was not thorough; the open wire problem should have been caught earlier in the environmental acceptance or screening test[s]."

For the longer term, the Independent Review Committee recommended that quality control philosophy and practices in fabrication, assembly, and testing should be strengthened and personnel should be trained accordingly. These recommendations would also affect reliability and quality assurance. The committee also recommended that consideration be given to increasing the redundancy of the platform.

While these recommendations of improved quality control and greater redundancy can be regarded as general maxims for achievement of improved reliability, it must be borne in mind that they are being made in the context of the expert Independent Review Committee's detailed review of the deficiencies in design, manufacture and testing of the specific inertial measurement unit on the Long March 3B.

The Independent Review Committee also made recommendations concerning the vibration, acoustic, and thermal environments to which the inertial measurement unit (and other avionics) were designed and tested. In their last report, they recommended that the PRC reexamine their environmental test plan for all avionics equipment, expressing the view that the tests might not be adequate for meeting "expected maximum flight loads including acoustic noises or detecting the defects in flight hardware."

The Intelsat 708 Encryption Boards Were Never Recovered

The Intelsat 708 satellite carried two FAC-3R encryption boards, one in each of its command processor units. These boards are considered Controlled Cryptographic Items by the Department of Defense, and the algorithm is classified "Secret."

Encryption boards are used to protect the command and control links between the ground station and satellite. They are required even on satellites that carry unclassified U.S. Government communications traffic. These devices do not encrypt the communications traffic that is otherwise processed by the satellite payload.373

Shortly after the Intelsat 708 launch failure, Loral's Communications Security custodian reported to the Department of Defense that the status of the encryption boards was being changed to "destroyed."

This was not seen as unusual by Department of Defense, however, because its prescribed policy requires that encryption boards be reported as "destroyed" when they are launched into orbit.

The Department of Defense did not require Loral to produce any evidence that the FAC-3R boards were in fact destroyed.374

After recovering debris from the crash site, Loral engineers grossly estimated the percentages of various subsystems and components that had been recovered.375 In that estimate, Loral engineer Muhammad Wahdy estimated that 30% of the command processors were recovered.376 Loral personnel then packaged the debris and shipped it to Palo Alto, where engineers examined the debris to specifically determine if the encryption boards were recovered.377

That examination determined that the FAC-3R boards were not, in fact, recovered from the crash site.378

The two FAC-3R encryption boards used on the Intelsat 708 satellite were mounted near the hydrazine propellant tanks and most likely were destroyed in the explosion. Additionally, the two FAC-3R boards had no distinguishing markings other than a serial number, making it extremely difficult to locate them amongst the crash debris.379

It is not known, however, whether the FAC-3R boards were recovered by the PRC. If they were, it would be difficult for the PRC to determine the cryptographic algorithm that was imprinted on them.

Reverse-engineering of a damaged board would be even more difficult. Any successful reverse-engineering would be resource intensive for the PRC.

If the PRC were able to determine the cryptographic algorithm contained on the FAC-3R board, it would gain insight into the state of the U.S. military in the 1960s, although such algorithms remain in use today.380

When the National Security Agency designs and recommends algorithms for use in equipment, it assumes that the equipment will be lost or compromised sometime during its operational lifetime. The National Security Agency relies on unique cryptographic keys for each separate satellite to keep command and control links secure. Because the FAC-3R boards on Intelsat 708 were uniquely keyed, the National Security Agency remains convinced that there is no risk to other satellite systems, now or in the future, resulting from having not recovering the FAC-3R boards from the PRC.381

Summary Assessment

In the period after the Independent Review Committee activities were terminated, the PRC participants, continuing their "hardware in the loop" simulations, rejected their own findings that the cause of the launch failure related to the inner frame of the inertial measurement unit. Instead, the PRC followed the path identified for them by the Independent Review Committee to conclude that the true cause of the launch failure was related to the follow-up frame.

The PRC engineers found that, even with artificially imposed making and breaking of contact of the electrical connection to the inner frame gimbal torque motor, they could not simulate the periodic behavior of the inertial platform for the entire 22-second flight duration. (As later reported by the PRC, the series of "hardware in the loop" simulations and analyses that led to the identification and verification of the follow-up frame gimbal axis torque motor circuit as the site of the failure took place from May 20 to June 20, 1996.)

The PRC participants then concluded that the root cause of the failure was to be found in the electrical circuits associated with the follow-up frame gimbal torque motor. The PRC engineers found that by breaking the circuit to the follow-up frame torque motor, the entire 22 seconds of flight, including the cyclic motions of the inertial platform, could be simulated.

According to the PRC engineers, examination of these circuits in inertial measurement units from the same production batch as the one used on the failed flight led to the discovery of a faulty gold-aluminum junction in the power module that drove this torque motor. The deterioration of the gold-aluminum joint was cited as the cause of the break in the circuit of the follow-up frame gimbal torque motor that led to the inertial measurement unit failure. These findings and conclusions were briefed to the satellite manufacturing, operating, and insurance communities in October 1996.

The Independent Review Committee's comments and suggestions could well have helped the PRC to come to the correct conclusion in their accident investigation more directly and quickly than they otherwise would have.

Taken together, the following actions by the Independent Review Committee would have had the effect of steering the PRC investigators away from their protracted narrow focus on the wrong failure mode:

o The Independent Review Committee's continuing skepticism concerning the make-and-break of electrical contact in the connection to the inner frame axis torque motor as a plausible explanation of the observed telemetry data (this was the PRC participants' initial explanation for the launch failure) o The committee's insistence that the failure mode investigation could not be considered complete and convincing until the entire 22 seconds of flight had been simulated (in contrast to the PRC participants' initial reliance on data from only the first seven seconds of flight) o The committee's pointing to the existence of dynamical limit cycles of platform motion that could result from a single break in a torque motor circuit, without repeated making and breaking of electrical contact (again in contrast to the PRC participants' approach) o The committee's persistent calling of attention to the potential significance of the flat output of the follow-up frame angle resolver (the actual location of the cause of the launch failure)

The search for the true failure mode in an accident investigation is not a simple, straightforward procedure. In some respects, it is like finding the way through a maze. It is all too easy to start down a wrong path and to stay on it for too long. Insights, hunches, and clues based on technical judgments and experience in prior failure mode analyses, simulations, and accident investigations can be helpful. Advice from individuals or groups drawn from outside the program that has suffered a failure is often sought, even in organizations that have world-class technical competence. Even opinions from such an outside group confirming that the investigation is on the right track have value.

In the complex task of failure investigation, the right failure mode and adequate corrective measures are often not arrived at the first time. Sometimes there are repeated failures from the same cause because the failure mode analysis was inaccurate or incomplete. An example was the failure of the PRC Long March 2E fairing, first in the Optus B2 launch in 1992, and then again in the Apstar 2 failure in 1995. Absent a dissenting view voiced by an authoritative independent group such as the Independent Review Committee, the pressures for getting on with the next launch of the Long March 3B could have prevailed, the flawed analysis of the failure mode could have been accepted, and another failure could have resulted. At the least, the contribution of the Independent Review Committee to the PRC accident investigation may have been simply to speed up the investigation.

The Independent Review Committee's recommendations seem to have affected PRC rocket reliability. The PRC briefed subsequent Long March launch customers and their insurers (for example, in the case of Loral's Mabuhay satellite launch) concerning measures being taken to improve the reliability of the Long March 3B inertial measurement unit (and avionics generally) and acceptance testing.

The measures the PRC took to improve the reliability of the Long March 3B go beyond those listed in the PRC briefings at the second meeting of the Independent Review Committee in Beijing (some of which may have been influenced by questions raised earlier by the committee). For example, in the Beijing meeting, wiring connections on the platform were to be double-soldered. The later briefings indicate that all platform-moveable connections are to be double-jointed (a stress-relieving measure of the type referred to in the Independent Review Committee report's recommendation to "alleviate the impact of unavoidable deflection on solder joint integrity") and double-wired.

Also, the recommendation of the Independent Review Committee for steps to attack quality control philosophy and practice broadly, and to train personnel, are reflected in the PRC statement of intent to strengthen education in quality control for all employees, and to establish income incentives to quality. These measures to improve quality control and reliability may be the standard fare of management literature, but the context of the Independent Review Committee recommendations is that they are made with regard to a specific set of processes and practices employed in the manufacture and assembly of the Long March 3B that they reviewed.

To the extent that these practices and processes are representative of those employed on other rockets or ballistic missiles or their components built by the same or related organizations, the quality control and reliability of these PRC rockets and missiles could also be improved.

To answer definitively whether the Independent Review Committee's technical advice and recommendations had the effect of assisting the PRC in improving the accuracy of PRC ballistic missiles, it would be necessary to know whether the Long March 3B inertial measurement unit is used on any ballistic missile and whether, in fact, the Long March 3B inertial measurement unit has advantages in accuracy or other measures over others available to the PRC. The guidance accuracy requirements for an intercontinental ballistic missile based on what is assumed to be PRC missile doctrine (essentially, a "city busting" strategy) would not be considerably greater than the accuracy requirements for a rocket used to launch satellites. Because the Long March 3B inertial measurement unit is lighter and smaller than the units used on the PRC's intercontinental ballistic missiles (such as the currently-deployed CSS-4), it would not need to have greater accuracy to be advantageously applied for its weight and size advantages.

Because the PRC strategic forces doctrine apparently targets U.S. cities, this does not require especially demanding accuracy. For this, the inertial measurement unit on the Long March 3B may be sufficient - in which case its size, weight, and, potentially, reliability advantages may weigh more heavily in its favor. Of course, if the PRC has available other lighter and smaller guidance units that are more accurate, those are more likely to be chosen for the mobile intercontinental ballistic missile mission.

For shorter-range ballistic missiles, the Long March 3B inertial measurement unit might possibly be advantageously used. But it would have to compete against a variety of even more compact, strapdown systems of sufficient accuracy for short ranges. Therefore, the application of the Long March 3B inertial measurement unit or some variant of it to some future PRC ballistic missile development remains possible.

To the extent that ballistic missile manufacturing processes and practices are similar to those for rockets, an incremental potential benefit to future PRC ballistic missile programs could come from increased production efficiency, and improved reliability through adoption of improved quality control and reliability-enhancing measures in design and manufacturing that were introduced after the accident investigation, including some that the Independent Review Committee advocated.

Endnotes

Chapter 6 Ð Satellite Launches in the PRC: Loral

1 Loral Voluntary Disclosure, June 17, 1996. Documents submitted at the insistence of the Department of State export licensing office to the Compliance Analysis Division, PM/DTC, SA-6, Room 200, Office of Defense Trade Controls, Bureau of Political-Military Affairs, United States Department of State, on June 17, 1996, by Feith & Zell, P.C., Washington, D.C., on behalf of Loral. Includes a 21 page report signed by Michael Poliner, an appendix containing a certification by Loral President Robert Berry, and several volumes of tabbed exhibits (L16); Hughes Investigation Report, "Report of Investigation of Alleged Violations of International Traffic in Arms Regulations (ITAR)," from Hughes Space and Communications Company, June 27, 1996. Includes a 24-page report, a 14-page chronology, and 53 tabbed exhibits.

2 "Crash of Intelsat VII Feb. 1996 Full Version," Videotape recording of Intelsat 708 launch failure from Intelsat.

3 "China's Space Program: A Brief Overview Including Commercial Launches of U.S.-Built Satellites," Congressional Research Service Report by Marcia Smith, June 23, 1998.

4 "China Space Chief Ready to Expend Human Lives," Nigel Hawkes, The Times Newspapers Limited, June 15, 1996.

5 Intelsat Internet web site, http://www.Intelsat.com; Intelsat letter to Select Committee, from Diane Hinson, VP & General Counsel, Intelsat, Re: "Responses to Questions Posed by the Select Committee," December 4, 1998, letter with attachment.

6 Intelsat letter to Select Committee, from Diane Hinson, VP & General Counsel, Intelsat, Re: "Responses to Questions Posed by the Select Committee," December 4, 1998, letter with attachment.

7 Ibid.

8 Interview of Daniel Lilienstein, October 28, 1998.

9 Intelsat letter to Select Committee, from Diane Hinson, VP & General Counsel, Intelsat, Re: "Responses to Questions Posed by the Select Committee," December 4, 1998, letter with attachment.

10 China Great Wall Industry Corporation Information Release, February 27, 1996.

11 "Technical & Technology Transfer Aspects of the Intelsat 708 Launch Failure Investigation," by Dr. Alexander Flax.

12 Hughes Investigation Report.

13 Ibid.

14 Ibid.

15 Loral memorandum from C. Patrick DeWitt, subject: "Minutes of the 11 April 1996 GSC [Government Security Committee] Meeting," April 15, 1996.

16 Loral Voluntary Disclosure, June 17, 1996.

17 Ibid.

18 Ibid.

19 Ibid.

20 Ibid.

21 Ibid.

22 Interview of Karl Kachigan, October 19, 1998.

23 Letter dated May 29, 1996, from William J. Lowell, Director, Office of Defense Trade Controls, State Department to Eric J. Zahler, General Counsel, Loral, and John J. Higgins, General Counsel, Hughes Electronics.

24 "DOD Assessment of Certain Unlicensed Activities by Loral Space Systems, Inc. and Hughes Aircraft Co.," May 16, 1997.

25 U.S. State Department form DSP-5, "Application/License for Permanent Export of Unclassified Defense Articles and Related Unclassified Technical Data," License No. 533593, Applicant: Loral, Date Prepared: 5/11/92, Date Approved: 9/18/92, Approved by: Ken Peoples, Destination Country: PRC, Commodity: "Technical Data in support of technical discussions for the launch of an Intelsat VIIA Spacecraft." DSP-5 form with continuation page and letter from State Department containing limitations and provisos.

26 William Schweickert's briefing presentation charts, "Long March Failure Review, Technology Export Briefing," April 22, 1996.

27 Wah Lim's briefing presentation charts, "Independent Oversight Committee Status Report" and "LM-3B Launch Failure Investigation Independent Review Committee," April 16, 1996.

28 Loral Voluntary Disclosure, June 17, 1996.

29 "Independent Review Committee Preliminary Report," May 10, 1996; Loral Voluntary Disclosure, June 17, 1996.

30 "Independent Review Committee Preliminary Report," May 10, 1996.

31 "Ibid.

32 Loral Voluntary Disclosure, June 17, 1996.

33 Ibid.

34 Ibid.

35 Ibid.

36 Deselding, Peter B., "Long March Review Finished," Space News, May 13-19, 1996.

37 Loral Voluntary Disclosure, June 17, 1996.

38 Loral Voluntary Disclosure, June 17, 1996. On December 2, 1998, Loral responded to a Select Committee interrogatory that asked Loral to update its 1996 Voluntary Disclosure to the State Department so as to be true, correct, and complete based on the totality of information regarding the Independent Review Committee that had been learned since June 1996. Loral's response included minor revisions to reflect additional information about Independent Review Committee activities. It continued to maintain, however, that "Based on further analysis of the law and facts, it is the Company's position that, despite the violation of company policy, Loral did not provide any Ôassistance' to the PRC within the meaning of the ITAR [International Traffic in Arms Regulations] - that is, SS/L [Loral] did not provide a Ôdefense service' as defined by the ITAR." The updated response went on to say, "none of the PRC's announced improvements to its Long March 3B rockets was the result of Loral's participation in the IRC [Independent Review Committee]."

39 Hughes Investigation Report.

40 Interagency review team report, July 22, 1998.

41 Intelsat Internet web site, http://www.Intelsat.com. Intelsat launched the world's first commercial communications satellite in 1965, providing service to the Atlantic Ocean region. In 1969, Intelsat provided global television coverage of the Apollo lunar landing to an audience of 500 million people around the world. In 1974, Intelsat activated a direct communications link, named the "Hot Line," between the White House and the Kremlin. In 1992, Intelsat and NASA collaborated on a historical and successful space mission to retrieve and reboost the Intelsat 603 satellite, stranded after a failed launch in 1990. Most recently, Intelsat helped broadcast live coverage of the 1998 Winter Olympic games from Nagano, Japan.

42 Intelsat Internet web site.

43 Ibid.

44 Ibid.

45 Ibid.

46 Intelsat Internet web site. Internet web site: http://msl.jpl.nasa.gov/.

47 Loral Internet web site: http://www.loral.com, http://www.ssloral.com.

48 Loral Internet web site.

49 Ibid.

50 Ibid.

51 Ibid.

52 Intelsat letter to Select Committee, from Diane Hinson, VP & General Counsel, Intelsat, Re: "Responses to Questions Posed by the Select Committee," December 4, 1998.

53 Department of State, Intelsat Technical Data export license, September 18, 1992.

54 Department of State, Intelsat Satellite export license, July 14, 1993.

55 Letter to Terry Edwards, Intelsat, from Ma Qimin, China Great Wall Industry Corporation, March 8, 1996, enclosing the Preliminary LM-3B Failure Analysis Report.

56 Deposition of Robert Berry, November 18, 1998.

57 New York Times, Eric Schmitt, June 24, 1998.

58 Loral Memorandum to John Merizon, from Muhammad Wahdy to John Merizon, Subject: "Retrieval of Spacecraft parts from the crash site," February 17, 1996.

59 China Great Wall Industry Corporation Information Release, March 28, 1996.

60 E-mail message to Peter Herron, Hughes, from Chris Lanzit, Hughes, Subject: "Meeting at CALT on LM-3/Apstar 1A & LM-3B failure,", March 14, 1996. (Hughes Investigation Report.)

61 Ibid.

62 "Technical and Technology Transfer Aspects of the Intelsat 708 Launch Failure Investigation," Dr. Alexander Flax, Washington Advisory Group, December 20, 1998.

63 E-mail message to Peter Herron, Hughes, from Chris Lanzit, Hughes, Subject: "Meeting at CALT on LM-3/Apstar 1A & LM-3B failure,", March 14, 1996. (Hughes Investigation Report).

64 Ibid.

65 Feith & Zell interview notes of Paul O'Conner.

66 Minutes of LM-3B Failure Investigation Meeting, April 10-12, 1996.

67 Lim letter to Liu Zhixiong, dated March 29, 1996.

68 Minutes of LM-3B Failure Investigation Meeting, April 10-12, 1996.

69 Deposition of Robert Berry, November 18, 1998.

70 Ibid.

71 LM-3B Launch Failure Investigation Independent Review Committee Charter, dated April 14, 1996.

72 Loral Voluntary Disclosure.

73 Loral memorandum from C. Patrick DeWitt, subject: "Minutes of the 11 April 1996 GSC [Government Security Committee Meeting]," April 15, 1996. (Loral Voluntary Disclosure)

74 Testimony of Dr. Stephen Bryen, September 2, 1998.

75 Loral Voluntary Disclosure.

76 Deposition of Julie Bannerman, November 24, 1998.

77 Deposition of Robert Berry, November 18, 1998.

78 Ibid.

79 Loral memorandum from C. Patrick DeWitt, subject: "Minutes of the 11 April 1996 GSC [Government Security Committee] Meeting," April 15, 1996.

80 Testimony of Dr. Stephen Bryen, September 2, 1998.

81 Duncan Reynard interview, October 9, 1998.

82 Ibid.

83 Ibid.

84 Feith & Zell interview notes of Duncan Reynard.

85 Deposition of Julie Bannerman, November 11, 1998.

86 Robert Berry Deposition, November 18, 1998; Government Security Committee Meeting Booklet, July 11, 1996.

87 Loral Voluntary Disclosure, June 17, 1996.

88 Duncan Reynard letter to Department of State, April 3, 1996.

89 Ibid.

90 Apstar License No. 653324, attached to Loral Voluntary Disclosure.

91 Mabuhay License, No. 653324, Attachment to Loral voluntary disclosure.

92 Apstar 1A Pre-Flight Technical Briefing, Beijing, April 15-16, 1996.

93 Ibid.

94 Apstar 1A Meeting Participant Document, dated April 15-16, 1996.

95 "Technical and Technology Transfer Aspects of the Intelsat 708 Launch Failure Investigation," Dr. Alexander Flax, Washington Advisory Group, December 20, 1998.

96 William Schweickert's briefing presentation charts dated 4/22/96, titled "Long March Failure Review, Technology Export Briefing." (Duncan Reynard Deposition)

97 Feith & Zell interview of Duncan Reynard.

98 Interview of Duncan Reynard, October 9, 1998.

99 Ibid.

100 Ibid.

101 Deposition of Julie Bannerman, November 24..

102 Minutes of Palo Alto Independent Review Committee Meeting dated April 22-24, 1996.

103 Attachment 1 to Minutes of first Independent Review Committee Meeting, Palo Alto, April 22-24, 1996.

104 China Great Wall Industry Corporation Information Release, March 28, 1996. Minutes of Palo Alto Independent Review Committee Meeting, April 22-24, 1996.

105 Minutes of Palo Alto Independent Review Committee Meeting, April 22-24, 1996.

106 Hughes Investigation Report.

107 Minutes of Palo Alto Independent Review Committee Meeting, April 22-24, 1996.

108 Hughes Investigation Report.

109 Nick Yen Memorandum to Kirk Keer, May 15, 1996.

110 Loral Memorandum to Kirk Keer, from Nick Yen, Subject: "Trip Report for Briefing to the U.S. Trade Commission in D.C.," cc: R. Berry, Dr. W. Lim, J. Bannerman, D. Reynard, E. McFarlane, May 15, 1996.

111 Ibid.

112 Ibid.

113 Loral Voluntary Disclosure, June 17, 1996.

114 Final Independent Review Committee Preliminary Report., Attachment IV

115 China Great Wall Industry Corporation Information Release, February 29, 1996.

116 China Great Wall Industry Corporation Information Release, March 28, 1996.

117 Independent Review Committee Preliminary Report.

118 China Great Wall Industry Corporation Insurance Briefing on LM-3B Failure Investigation, April 15-16, 1996, Loral Voluntary Disclosure.

119 Ibid.

120 Loral Voluntary Disclosure; Deposition of Karl Kachigan.

121 Meeting Minutes, April 22-26, 1996.

122 Independent Review Committee Preliminary Report, Attachment IV.

123 Ibid.

124 Loral Voluntary Disclosure, June 17, 1996, Independent Review Committee Preliminary Report, May 10, 1996.

125 "Independent Review Committee Preliminary Report," May 10, 1996.

126 Loral Voluntary Disclosure and Exhibit A-9, Fried Frank Interrogatory Response, December 2, 1998.

127 Loral Voluntary Disclosure, June 17, 1996.

128 Ibid.

129 Ibid.

130 Feith & Zell notes of interview of Wah Lim.

131 Independent Review Committee Preliminary Report.

132 Independent Review Committee Preliminary Report; Deposition of Karl Kachigan.

133 Independent Review Committee Preliminary Report.

134 Ibid.

135 Ibid.

136 Final Independent Review Committee Preliminary Report.

137 "Independent Review Committee Preliminary Report," May 10, 1996.

138 Deposition of Julie Bannerman, November 24, 1998.

139 Ibid.

140 Ibid.

141 Ibid.

142 Ibid.

143 Ibid.

144 Ibid.

145 Ibid.

146 Ibid.

147 Ibid.

148 Ibid.

149 Ibid.

150 Ibid.

151 Ibid.

152 Interview of Duncan Reynard, October 9, 1998.

153 Ibid.

154 Wah Lim letter to Paul O'Connor, VP, Space and Telecom Group, J & H Marsh & McLennan, May 13, 1996.

155 Lim refused to be interviewed or deposed without a grant of immunity, citing his Fifth Amendment right against self-incrimination. The Department of Justice objected to a grant of immunity for Lim and the Select Committee decided not to grant immunity to him.

156 Deposition of Julie Bannerman, November 24,1998; Loral memorandum to Bob Berry, from D.L. Reynard, cc: Wah Lim, Julie Bannerman, Pat Dewitt, Hal Bradshaw, Subject: "SS/L [Loral] Involvement in the Investigation of the LM-3B Launch Failure," marked "URGENT" and "SS/L [Loral] Proprietary," May 14, 1996. (Deposition of Duncan Reynard).

157 Deposition of Julie Bannerman, November 24, 1998.

158 Ibid.

159 Ibid.

160 Interview of Duncan Reynard, October 9, 1998. Loral memorandum to Bob Berry, from D.L. Reynard, cc: Wah Lim, Julie Bannerman, Pat Dewitt, Hal Bradshaw, Subject: "SS/L [Loral] Involvement in the Investigation of the LM-3B Launch Failure," marked "URGENT" and "SS/L [Loral] Proprietary," May 14, 1996, 2 pages. (Deposition of Duncan Reynard)

161 Interview of Duncan Reynard, October 9, 1998.

162 Ibid.

163 Ibid.

164 Ibid.

165 Handwritten memorandum to Bob Berry, et al., from D. Reynard titled "Summary of Advice from DOS/ODTC [Department of State/Office of Defense Trade Controls] and DTSA [Defense Technology Security Administration]!," May 15, 1996 (Deposition of Duncan. Reynard); Interview of Bob Kovac, November 6, 1998.

166 Deposition of Julie Bannerman, November 24, 1998.

167 Ibid.

168 Ibid.

169 Ibid.

170 Ibid.

171 Ibid.

172 Ibid.

173 Deposition of Duncan Reynard, November 4, 1998.

174 Deposition of Julie Bannerman, November 24, 1998.

175 Ibid.

176 Loral Voluntary Disclosure, June 17, 1996.

177 Ibid.

178 State Department letter to Eric J. Zahler, from William J. Lowell, Vice President, Secretary and General Counsel, Loral, Re: "3UA000-DLR-96-0521A," May 29, 1996.

179 Loral Voluntary Disclosure, June 17, 1996.

180 Deposition of Duncan Reynard, November 4, 1996.

181 Government Security Committee Meeting Minutes, July 11, 1996 (listing date of assignment December 25, 1995 and listing due date January 25, 1996).

182 Duncan Reynard Interview, October 9, 1998; Julie Bannerman Deposition, November 24, 1998.

183 Deposition of Julie Bannerman, November 24, 1998..

184 Bill Schweickert interview, September 23, 1998.

185 Feith & Zell interview notes of Bill Schweickert.

186 Deposition of Duncan Reynard; Deposition of Julie Bannerman.

187 Deposition of Julie Bannerman.

188 Deposition of Duncan Reynard; Deposition of Julie Bannerman.

189 Deposition of Julie Bannerman.

190 Deposition of Bernard Schwartz (CEO); Interview Memorandum of Michael Targoff (President); Deposition of Eric Zahler (General Counsel).

191 Duncan Reynard Deposition; Julie Bannerman Deposition.

192 Memorandum for the Record by Mark N. Rochlin, Lt. Col., U.S. Army, Assistant for Aerospace Technology (retired), dated May 31, 1995. Spaulding and Wright interview of same

193 Intelsat 708 License No. 533593, attached to Loral Voluntary Disclosure.

194 Duncan Reynard letter to State Department and Commerce Department, April 3, 1996.

195 Apstar License, No. 653324, attached to Loral Voluntary Disclosure.

196 Mabuhay License, No. 651982, attached to Loral Voluntary Disclosure.

197 Loral Voluntary Disclosure, June 17, 1996.

198 Ibid.

199 Invitation letter to attend China Great Wall Industry Corporation's LM-3B Failure Review Presentation by Zia Oboodiyat, Ex. Dir., Mabuhay Program, Loral, dated October 9, 1996.

200 China Great Wall Industry Corporation Information Release, September 10, 1996.

201 Loral Voluntary Disclosure, "Failure Tree" presentation made at Beijing Independent Review Committee meeting.

202 Final Independent Review Committee Preliminary Report, "Summary of Observations."

203 China Great Wall Industry Corporation briefing charts, "Content of LM-3B Failure Review," October 21-22, 1996.

204 Department of Defense Report, August 6, 1996.

205 "DOD [Department of Defense] Assessment of Certain Unlicensed Activities by Loral Space Systems, Inc. and Hughes Aircraft Co.," May 16, 1997.

206 Interagency review team report, July 22, 1998.

207 Ibid.

208 Ibid.

209 Loral letter to Liu Zhixiong, VP China Great Wall Industry Corporation, from Wah Lim, Loral, cc: Independent Review Committee members, no date, containing minutes of the April 22-24, 1996 Independent Review Committee meeting in Palo Alto.

210 Loral Voluntary Disclosure, June 17, 1996.

211 Ibid.

212 Ibid.

213 Ibid.

214 Ibid.

215 Ibid.

216 Ibid.

217 Ibid.

218 William Schweickert's briefing charts, April 22, 1996.

219 Ibid..

220 Ibid.

221 Ibid.

222 Department of Defense Assessment, May 16, 1997.

223 Interagency review team report, July 22, 1998.

224 Ibid.

225 Ibid.

226 Interagency review team report, July 22, 1998.

227 Defense Department Report, August 6, 1996.

228 Department of Defense Assessment, May 16, 1997.

229 China Great Wall Industry Corporation LM-3B Failure Review briefing package presented at Loral offices on October 21-22, 1996.

230 Department of Defense Assessment, May 16, 1997.

231 Interagency review team report, July 22, 1998.

232 Department of Defense Report, August 11, 1997.

233 Briefing package titled "Agenda for Mabuhay Pre-shipment Review," by China Academy of Launch Vehicle Technology, April 14, 1997.

234 "Independent Review Committee Preliminary Report," May 10, 1996, 27 pages; Briefing package titled "Agenda for Mabuhay Pre-shipment Review," by China Academy of Launch Vehicle Technology, April 14, 1997.

235 Letter to Rick Cinquegrana, Chief Investigative Counsel, Select Committee, from John Boese, Fried Frank, Harris, Shriver & Jacobson, Re: "Interrogatory Response," December 2, 1998, with enclosure titled "Response of Space Systems/Loral to the November 18, 1998 Interrogatory of the Select Committee on U.S. National Security and Military/Commercial Concerns with the People's Republic of China."

236 China Great Wall Industry Corporation briefing package titled "LM-3B/Intelsat-708 Failure Review, Apstar-1A Pre-Flight Briefing," April 15-16, 1996.

237 Ibid.

238 China Great Wall Industry Corporation briefing package titled "LM-3B/Intelsat-708 Failure Review, Apstar-1A Pre-Flight Briefing," April 15-16, 1996. (Loral Blue book, Vol. 2); Briefing package titled "Agenda for Mabuhay Pre-shipment Review," by China Academy of Launch Vehicle Technology, April 14, 1997.

239 "DOD [Department of Defense] Assessment of Certain Unlicensed Activities by Loral Space Systems, Inc. and Hughes Aircraft Co.," May 16, 1997.

240 Interagency review team report, July 22, 1998.

241 "93062: Space Launch Vehicles: Government Requirements and Commercial Competition," Congressional Research Service Issue Brief for Congress, by Marcia Smith, Updated July 2, 1998.

242 Interview of Daniel Lilienstein, October 28, 1998.

243 "93062: Space Launch Vehicles: Government Requirements and Commercial Competition," Congressional Research Service Issue Brief for Congress, by Marcia Smith, Updated July 2, 1998.

244 Ibid.

245 GEO is an acronym for Geostationary or Geosynchronous Earth Orbit. GEO orbits are extensively used by communications satellites because they orbit every 24 hours and remain relatively fixed above a location on Earth.

246 LEO is an acronym for Low Earth Orbit. LEO orbits are used by a wide variety of satellites and orbit the Earth at 200 to 1000 km in altitude.

247 "93062: Space Launch Vehicles: Government Requirements and Commercial Competition," Congressional Research Service Issue Brief for Congress, by Marcia Smith, Updated July 2, 1998.

248 "China's Space Program: A Brief Overview Including Commercial Launches of U.S.-Built Satellites," Congressional Research Service Report by Marcia Smith, June 23, 1998.

249 "U.S.-PRC Commercial Launch Services Talks," White House, U.S. Trade Representative.

250 White House U.S. Trade Representative Trade Policy Staff Committee, Draft Document 1993-20, Subject: "China Space Launch: Intelsat VII-A Satellite," April 26, 1993.

251 White House, U.S. Trade Representative, document, "U.S.-PRC Bilateral Agreement on Space Launch Services."

252 White House, U.S. Trade Representative, document, "China Space Launch."

253 "93062: Space Launch Vehicles: Government Requirements and Commercial Competition," Congressional Research Service Issue Brief for Congress, by Marcia Smith, Updated July 2, 1998.

254 U.S. State Department form DSP-5, "Application/License for Permanent Export of Unclassified Defense Articles and Related Unclassified Technical Data," License No. 533593, Applicant: Loral, Date Prepared: May 11, 1992, Date Approved: September 18, 1992, Approved by: Ken Peoples, Destination Country: PRC, Commodity: "Technical Data in support of technical discussions for the launch of an Intelsat VIIA Spacecraft."

255 DSP-5 for license 533593.

256 U.S. State Department form DSP-5, "Application/License for Permanent Export of Unclassified Defense Articles and Related Unclassified Technical Data," License No. 544724, Applicant: Loral, Date Prepared: September 4, 1992, Date Approved: July 14, 1993, Approved by: Ken Peoples, Destination Country: Intelsat, Commodity: "Intelsat VIIA Communications Satellite FM 708, Associated equipment and documentation."

257 DSP-5 for license 544724.

258 Loral Briefing Presentation Charts, "Briefing for China Aerospace Corat," April 7-8, 1995.

259 "Memorandum of Agreement between China Aerospace Corporation and Space Systems / Loral regarding Long Term Cooperation," signed on June 9, 1995 by Robert E. Berry and Zhang Xin-Xia, with signed copy in Chinese.

260 Loral letter to Li Zuhong, Vice President, Chinese Academy of Space Technology, from Edward M. Hunter Subject: "Furtherance of the Technology Cooperation Agreement Between CAST [China Academy of Space Technology] and SS/L [Loral]," November 2, 1995.

261 Interview of Daniel Lilienstein, October 28, 1998.

262 FF docs.

263 Hughes Investigation Report.

264 Interview of John Merizon, October 20, 1998.

265 Loral Memorandum to John Merizon, from Muhammad Wahdy to John Merizon, Subject: "Retrieval of Spacecraft parts from the crash site," February 17, 1996.

266 Letter to He Xing, China Great Wall Industry Corporation, from Paul O'Connor, February 21, 1996.

267 Letter to Paul O'Connor, Michael Hewins and Timothy Wright, J & H Marsh & McLennan, from Jacques Masson, J & H Marsh & McLennan, February 22, 1996.

268 Letter to He Xing, China Great Wall Industry Corporation, from Paul O'Connor, J & H Marsh & McLennan, February 26, 1996

269 Ibid.

270 Ibid.

271 Hughes Investigation Report.

272 Letter to He Xing, China Great Wall Industry Corporation, from Paul O'Connor, J & H Marsh & McLennan, February 28, 1996.

273 Interview of Daniel Lilienstein, October 28, 1998. Memorandum to Intelsat management, from Daniel Lilienstein, titled "Management Briefing," Subject: "China Launch Experience," March 4, 1996.

274 Hughes Investigation Report.

275 Ibid.

276 Ibid.

277 China Great Wall Industry Corporation letter to Robert E. Berry, President, Loral, from Liu Zhixiong, Vice President, China Great Wall Industry Corporation, Subject: "Invitation to the Failure Investigation," March 14, 1996.

278 Loral letter to Liu Zhixiong, Vice President, China Great Wall Industry Corporation, Beijing, China, from Wah Lim, March 18, 1996.

279 China Great Wall Industry Corporation letter to Wah Lim, Loral, from Liu Zhixiong, March 20, 1996, 1-page.

280 Letter to Bao Miaoqin, Janet Sie and Paul O'Connor, from Jacques Masson, J & H Marsh & McLennan, March 20, 1996.

281 Loral letter to Liu Zhixiong, Vice President, China Great Wall Industry Corporation, Beijing, China, from Kirk D. Keer, March 21, 1996.

282 Letter to Sheila Nicoll, J & H Intermediaries, to Chuck Rudd, ACE Ltd., March 21, 1996.

283 China Great Wall Industry Corporation letter to Kirk Keer, VP, Loral, from Liu Zhixiong, Vice President, China Great Wall Industry Corporation, Subject: "The Issues on the LM-3B Failure Investigation Meeting," March 27, 1996.

284 China Great Wall Industry Corporation Information Release, March 28, 1996.

285 Loral letter to Liu Zhixiong, Vice President, China Great Wall Industry Corporation, Beijing, China, from Wah Lim, March 29, 1996.

286 Hughes Investigation Report. China Great Wall Industry Corporation letter to Peter M. Herron, VP Marketing, Hughes Space and Communications International, Inc., from He Xing, subject: "Signing ChinaSat 7 Launch Contract and Others," April 4, 1996.

287 Letter to Bao Miaoqin, APT and Freeman Zhang, J & H Marsh & McLennan, from Zhou Wei, China Great Wall Industry Corporation, April 5, 1996.

288 Handwritten notes by Nabeeh Totah, Loral, titled "Mtg. with ÔChina Great Wall' Ð Beijing," April 10, 1996. Deposition of Nabeeh Totah, October 14, 1998. Loral letter to Liu Zhixiong, Vice President, China Great Wall Industry Corporation, Beijing, China, from Wah Lim, March 29, 1996.

289 Loral Voluntary Disclosure, June 17, 1996.

290 Loral memorandum from C. Patrick DeWitt, Subject: "Minutes of the 11 April 1996 GSC Meeting," April 15, 1996.

291 Hughes Investigation Report. Loral fax to Robert Steinhauer, Chief Scientist, Hughes, Space & Communications, from Wah Lim, April 16, 1996, 5-pages total, including 3-page charter titled "LM-3B Launch Failure Investigation Independent Review Committee (IRC) Charter," April 14, 1996, and a second fax cover sheet showing W. Lim faxed this on April 16, 1996 to Carolyn from China asking her to fax it to Independent Review Committee members.

292 Hughes Investigation Report.

293 Wah Lim's briefing presentation charts "Independent Oversight Committee Status Report" and "LM-3B Launch Failure Investigation Independent Review Committee," April 16, 1996.

294 Ibid.

295 Loral letter to He Xing, Deputy General Manager, Space Division, China Great Wall Industry Corporation, from Wah Lim, April 17, 1996.

296 Hughes Investigation Report.

297 Loral Voluntary Disclosure, June 17, 1996.

298 Hughes Investigation Report.

299 William Schweickert's briefing charts, April 22, 1996.

300 Loral Voluntary Disclosure, June 17, 1996.

301 Ibid.

302 Hughes Investigation Report.

303 Loral Memorandum to Kirk Keer, from Nick Yen, Subject: "Trip Report for Briefing to the U.S. Trade Commission in D.C.," cc: R. Berry, Dr. W. Lim, J. Bannerman, D. Reynard, E. McFarlane, May 15, 1996. Loral Voluntary Disclosure, June 17, 1996.

304 Hughes Investigation Report.

305 Ibid.

306 Loral Voluntary Disclosure, June 17, 1996; Loral letter to Liu Zhixiong, VP China Great Wall Industry Corporation, from Wah Lim, Loral, cc: Independent Review Committee members, no date, containing minutes of the April 22-24, 1996 Independent Review Committee meeting in Palo Alto.

307 Hughes Investigation Report.

308 Briefing presentation charts "Launch Failure Investigation Agenda, Independent Review Committee," April 30, 1996 and May 1, 1996, included as "Attachment II" to the Loral generated minutes of the Independent Review Committee meetings in China.

309 Loral Voluntary Disclosure, June 17, 1996.

310 "Summary of IRC [Independent Review Committee] Review and Preliminary Observations," and "Day Two (May 1, 1996) Revised Agenda," included as "Attachment III" to the Loral-generated minutes of the Independent Review Committee meetings in China.

311 Interview of Karl Kachigan, October 19, 1998.

312 E-mail message to Leslie Block, Loral, from J. Rodden, June 12, 1996.

313 E-mail message to John Holt, from John Smay, May 4, 1996.

314 Hughes Investigation Report.

315 Loral memorandum to W. Lim, from N. Totah, Subject: "LM-3B Failure," May 3, 1996, 3 pages, signed by W. F. Schmidt for N. I. Totah.

316 Handwritten memorandum to W. Lim, from N. Totah Subject: "IRC [Independent Review Committee] Summary Position Ð Draft from J.A. Holt," May 3, 1996.

317 Fax to Wah Lim, from J. A. Holt, May 3, 1996.

318 Fax to Wah Lim, from John Smay, document "Long March 3B Failure International Review Committee Preliminary Report," May 3, 1996, transmitted on May 4, 1996.

319 Letter to Wah Lim, from Frederick N. Ormsby, May 4, 1996.

320 E-mail message to John Holt, from John Smay, May 4, 1996.

321 Fax to Wah Lim, from R. Hildebrandt, Subject: "Long March Ð 3B / IRC [Independent Review Committee] in Beijing," May 5, 1996.

322 Fax to Wah Lim, from J. A. Holt, "IRC [Independent Review Committee] Preliminary Assessment Report," May 6, 1996.

323 Hughes Investigation Report.

324 Loral Voluntary Disclosure, June 17, 1996.

325 Loral Memorandum to "The IRC [Independent Review Committee] Members," from N. Yen, Subject "The Draft of the IRC [Independent Review Committee] Preliminary Report," May 7, 1996. Loral Voluntary Disclosure, June 17, 1996.

326 Interview Notes from Feith & Zell interview of Wah Lim on May 31, 1996.

327 Fax to Nick L. Yen, from J. A. Holt, "Draft of IRC [Independent Review Committee] Preliminary Report," May 8, 1996.

328 Fax to Nick L. Yen, from R. A. Steinhauer, Subject: "Comments on Draft IRC [Independent Review Committee] Report + Additional Comments," May 8, 1996.

329 Fax to Wah Lim, from J. A. holt, titled "URGENT" and "IRC [Independent Review Committee] Preliminary Report," May 9, 1996.

330 Fax to Nick Yen, from Reinhard Hildebrandt, Subject: "The Draft of the IRC [Independent Review Committee] Preliminary Report," May 9, 1996.

331 Hughes Investigation Report.

332 Feith & Zell interview notes of Wah Lim, June 5, 1996.

333 Loral letter to Liu Zhixiong, Vice President, China Great Wall Industry Corporation, Beijing, China, from Wah Lim, May 10, 1996. Interview of Duncan Reynard, October 9, 1998.

334 Loral Voluntary Disclosure, June 17, 1996.

335 Loral letter to Independent Review Committee Members, from Dr. Wah Lim, Subject: "LM-3B Launch Failure Investigation and Evaluation," May 10, 1996.

336 Loral Voluntary Disclosure, June 17, 1996.

337 Ibid.

338 Interview of Duncan Reynard, October 9, 1998.

339 Loral letter to He Xing, Deputy General Manager, China Great Wall Industry Corporation, in Beijing, China, from Dr. Wah Lim, May 13, 1996.

340 Loral letter to Paul O'Connor from Wah Lim, May 13, 1996.

341 Loral memorandum to Bob Berry, from D.L. Reynard, cc: Wah Lim, Julie Bannerman, Pat Dewitt, Hal Bradshaw, Subject: "SS/L [Loral] Involvement in the Investigation of the LM-3B Launch Failure," marked "URGENT" and "SS/L [Loral] Proprietary," May 14, 1996, 2 pages. (D. Reynard deposition).

342 Hughes Investigation Report.

343 Loral Memorandum to Kirk Keer, from Nick Yen, Subject: "Trip Report for Briefing to the U.S. Trade Commission in D.C.," cc: R. Berry, Dr. W. Lim, J. Bannerman, D. Reynard, E. McFarlane, May 15, 1996.

344 Handwritten memorandum to Bob Berry, et al, from D. Reynard titled "Summary of Advice from DOS/ODTC and DTSA!," May 15, 1996.

345 Loral memorandum to Eric Zahler, from J. Bannerman, May 15, 1996.

346 Hughes Investigation Report.

347 Fax message to Duncan Reynard, from Hal Bradshaw, May 17, 1996. (D. Reynard deposition)

348 Loral letter to William J. Lowell, State Department, from Duncan L. Reynard, Subject: "Intelsat 708 Launch Failure Review Ð Initial Notification," May 21, 1996. (D. Reynard deposition)

349 Loral Voluntary Disclosure, June 17, 1996.

350 Hughes Investigation Report.

351 Ibid.

352 State Department letter to Eric J. Zahler, from William J. Lowell, Vice President, Secretary and General Counsel, Loral, Re: "3UA000-DLR-96-0521A," May 29, 1996.

353 Loral Voluntary Disclosure, June 17, 1996.

354 Ibid.

355 Loral letter to William J. Lowell, State Department, from Eric J. Zahler, Vice President, Secretary, and General Counsel, cc: Julie B. Bannerman, Esq. and Douglas J. Feith, Esq., May 31, 1996.

356 Memorandum to Wah Lim, from D. Reynard, Subject: "Retrieval of IRC [Independent Review Committee] Documents Sent Out," June 3, 1996.

357 Loral Voluntary Disclosure, June 17, 1996.

358 Hughes letter to William J. Lowell, State Department, from John T. Kuelbs, Re: "Your letter of May 29, 1996," cc: John J. Higgins, Philip S. Rhoads, June 4, 1996.

359 Loral letter to Paul O'Connor, Vice President, Space & Telecom Group, Johnson & Higgins, Washington, D.C., from Wah Lim, June 6, 1996.

360 Loral letter to Independent Review Committee Members, from Dr. Wah Lim, Subject: "Retrieval of IRC [Independent Review Committee] Distributed Documents," June 6, 1996. Hughes Investigation Report.

361 Loral letter to Liu Zhixiong, Vice President, China Great Wall Industry Corporation, Beijing, China, from Wah Lim, Subject: "Retrieval of IRC [Independent Review Committee] Distributed Documents," June 6, 1996.

362 Hughes Investigation Report.

363 Loral Voluntary Disclosure, June 17, 1996.

364 Hughes letter to William Lowell, from Mary Lou Cahir, June 27, 1996: Hughes Investigation Report.

365 CASC Letter to Wah Lim, Loral, from Liu Jiyuan, President, CASC, cc: Fred Ormsby, Karl Kachigan, Robert Steinhauer, John Holt, John Smay, Reinhard Hildebrandt, June 18, 1996. (Kachigan Deposition).

366 Hughes letter to Philip S. Rhoads, State Department, from Mary Lou Cahir, September 26, 1998.

367 Interview of Karl Kachigan, October 19, 1998. Loral memorandum to D. Reynard, J. Rodden, N. Totah, N. Yen, F. Ormsby, K. Kachigan, Maj. P. Smith, and others, from Zia Oboodiyat, Executive Director, Mabuhay Program, Loral, Subject: "Invitation to attend China Great Wall Industry Corporation's LM-3B failure review presentation," October 9, 1996. (Kachigan Deposition).

368 "DOD [Department of Defense] Assessment of Certain Unlicensed Activities by Loral Space Systems, Inc. and Hughes Aircraft Co.," May 16, 1997.

369 "China's Space Program: A Brief Overview Including Commercial Launches of U.S.-Built Satellites," by Marcia Smith, Congressional Research Service, June 23, 1998. "Presidential Satellite Waivers and Other Related Launch Information," table by Aerospace Industries Association, Internet web site: http://aia-aerospace.org/homepage/china_table1.html.

370 Ibid.

371 "Background Re: Independent Review Committee (IRC) Activities Relating to the 1996 Long March Launch Failure," report to U.S. House of Representatives Committee on Science, May 7, 1998.

372 Committee on Science Report.

373 Memorandum for the Record documenting Defense Department briefing to Select Committee on September 22, 1998, by Eric Desautels, September 25, 1998.

374 Ibid.

375 Interview of John Merizon, October 20, 1998.

376 Loral Memorandum to John Merizon, from Muhammad Wahdy to John Merizon, Subject: "Retrieval of Spacecraft parts from the crash site," February 17, 1996.

377 Interview of John Merizon, October 20, 1998.

378 Ibid.

379 Memorandum for the Record documenting briefing to Select Committee on September 22, 1998, by Eric Desautels, September 25, 1998.

380 Ibid.

381 Ibid.